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Inflation can seem complex but it is a very simple benchmark that allows us to compare the relative costs of a service or goods over time.

Calculating inflation requires two simple figures:

- a: The current cost of a product/service
- b: The previous cost of a product/service

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Using the two figures above for the product/service defined, inflation is calculated using the formula below.

Inflation Rate (%) = ( (b - a) / a) x 100

Inflation Rate calculations for specific countries encompass many products and services but the inflation rate formula remains the same.

You may like to try our Inflation Calculator to see how the value of money has changed over time.

Next: Causes of inflation

Previous: Deflation Explained