# Interpretation: What is "inflation"? **URL:** \ **Category:** Factual Questions\ **Created:** [December 10, 2008, 2:12am UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489 "2008-12-10T02:12:58Z")\ **Posts on this page:** 15\ **Page:** 1
**Author:** ![Mr.Slant](https://avatars.discourse-cdn.com/v4/letter/m/c57346/32.png) [@Mr.Slant](https://boards.straightdope.com/u/Mr.Slant)\ **Post date:** [December 10, 2008, 2:12am UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/1 "2008-12-10T02:12:58Z")
I was just looking over my wife’s homework assignment in her basic Econ class. There’s a question, phrased: "Using the Internet, find the following: 1. Inflation Rate (%) for the Year 2007" Is there some reason this guy didn’t just say CPI? Is it industry standard practice to say “Inflation” instead of CPI if you’re teaching a Freshman-level Economics class? If this is a dumb question, forgive me: I’m a sociology major, and all of my econ reading has been as an amateur. ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [December 10, 2008, 2:19am UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/2 "2008-12-10T02:19:26Z")
The CPI (Consumer Price Index) is how much a certain basket of goods costs at a given time. Inflation measures the rate of change of prices indices such as the CPI. ---
**Author:** ![Freddy\_the\_Pig](https://avatars.discourse-cdn.com/v4/letter/f/a587f6/32.png) [@Freddy\_the\_Pig](https://boards.straightdope.com/u/Freddy_the_Pig)\ **Post date:** [December 10, 2008, 4:27am UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/3 "2008-12-10T04:27:15Z")
It’s a sloppy question. There is more than one measure of inflation. Three common ones are the _percent change in_ the CPI, the percent change in the Producer Price Index, and the GDP deflator. Of course, it may be that the point of the question is that people will report slightly different results which will lead to a discussion of the different inflation measures. ---
**Author:** ![SmackFu](https://avatars.discourse-cdn.com/v4/letter/s/53a042/32.png) [@SmackFu](https://boards.straightdope.com/u/SmackFu)\ **Post date:** [December 10, 2008, 4:47am UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/4 "2008-12-10T04:47:18Z")
Isn’t CPI a term specific to the US, while inflation is the general term? ---
**Author:** ![DanBlather](https://avatars.discourse-cdn.com/v4/letter/d/f4b2a3/32.png) [@DanBlather](https://boards.straightdope.com/u/DanBlather)\ **Post date:** [December 10, 2008, 4:52am UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/5 "2008-12-10T04:52:28Z")
> [@SmackFu](#): > > Isn’t CPI a term specific to the US, while inflation is the general term? The term CPI may indeed be unique to the US, but it is not synonomous with inflation. CPI is one metric for the cost of consumer goods. As an analogy think of CPI as the price of gas, and inflaton as the change in gas prices over time expressed as a percentage. ---
**Author:** ![Mr.Slant](https://avatars.discourse-cdn.com/v4/letter/m/c57346/32.png) [@Mr.Slant](https://boards.straightdope.com/u/Mr.Slant)\ **Post date:** [December 10, 2008, 5:01am UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/6 "2008-12-10T05:01:21Z")
> [@Freddy\_the\_Pig](#): > > It’s a sloppy question. There is more than one measure of inflation. Three common ones are the _percent change in_ the CPI, the percent change in the Producer Price Index, and the GDP deflator. Of course, it may be that the point of the question is that people will report slightly different results which will lead to a discussion of the different inflation measures. If you thought that was sloppy, you should see one of the other parts of his assignment: \* Obtain: Inflation Rate (%) for 2007 Poverty Rate (%) for 2007 Unemployment Rate (%) for 2007 GDP Rate (%) for 2007 Discount Rate (%) for Dec 2007 **Plot all of the above on 1 (one) graph to show their relationship.** \* Now, this isn’t a multi-year plot of the variables… it’s just going to be a chart with Unemployment Rate sitting in a line with Inflation Rate and GDP Rate. I feel like plagiarizing some of Louis Black’s lines upon hearing a certain conversation about a girl and her horse. My head really wants to explode… ---
**Author:** ![Henrichek](https://avatars.discourse-cdn.com/v4/letter/h/5daacb/32.png) [@Henrichek](https://boards.straightdope.com/u/Henrichek)\ **Post date:** [December 10, 2008, 5:25am UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/7 "2008-12-10T05:25:44Z")
CPI is not US specific. We have it over here too, and Wikipedia has CPI articles in plenty of languages with information about different countries’ CPI history. ---
**Author:** ![T\_SQUARE](https://avatars.discourse-cdn.com/v4/letter/t/9de053/32.png) [@T\_SQUARE](https://boards.straightdope.com/u/T_SQUARE)\ **Post date:** [December 10, 2008, 8:00am UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/8 "2008-12-10T08:00:36Z")
Think of it this way: CPI is a tool to measure inflation. And its got quite a few problems, for example, people don’t buy the same stuff today as they did in the past. And did it really say GDP rate or GDP growth rate? ---
**Author:** ![Mr.Slant](https://avatars.discourse-cdn.com/v4/letter/m/c57346/32.png) [@Mr.Slant](https://boards.straightdope.com/u/Mr.Slant)\ **Post date:** [December 10, 2008, 11:33am UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/9 "2008-12-10T11:33:27Z")
I typed that verbatim from the hand-out. ---
**Author:** ![Mr.Slant](https://avatars.discourse-cdn.com/v4/letter/m/c57346/32.png) [@Mr.Slant](https://boards.straightdope.com/u/Mr.Slant)\ **Post date:** [December 10, 2008, 6:03pm UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/10 "2008-12-10T18:03:23Z")
Anyone from the daytime crowd have any input here? ---
**Author:** ![Jackknifed\_Juggernaut](https://avatars.discourse-cdn.com/v4/letter/j/9de053/32.png) [@Jackknifed\_Juggernaut](https://boards.straightdope.com/u/Jackknifed_Juggernaut)\ **Post date:** [December 10, 2008, 7:52pm UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/11 "2008-12-10T19:52:47Z")
> [@T\_SQUARE](#): > > Think of it this way: CPI is a tool to measure inflation. And its got quite a few problems, for example, people don’t buy the same stuff today as they did in the past… Because it excludes substitute or alternative goods, many economists think that the CPI overstates actual inflation. ---
**Author:** ![KneadToKnow](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kneadtoknow/32/3999_2.png) [@KneadToKnow](https://boards.straightdope.com/u/KneadToKnow)\ **Post date:** [December 10, 2008, 8:20pm UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/12 "2008-12-10T20:20:53Z")
> [@Mr.Slant](#): > > Anyone from the daytime crowd have any input here? Only to note that as a rule, the really good teachers don’t teach freshman classes. But you’ve already discovered that. ---
**Author:** ![Mr.Slant](https://avatars.discourse-cdn.com/v4/letter/m/c57346/32.png) [@Mr.Slant](https://boards.straightdope.com/u/Mr.Slant)\ **Post date:** [December 10, 2008, 10:41pm UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/13 "2008-12-10T22:41:52Z")
Thanks. I got a good chuckle from that; I’ll make sure to show the wife these posts. ---
**Author:** ![YamatoTwinkie](https://avatars.discourse-cdn.com/v4/letter/y/cc9497/32.png) [@YamatoTwinkie](https://boards.straightdope.com/u/YamatoTwinkie)\ **Post date:** [December 11, 2008, 5:17pm UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/14 "2008-12-11T17:17:12Z")
> [@Mr.Slant](#): > > If you thought that was sloppy, you should see one of the other parts of his assignment: > \* > Obtain: > Inflation Rate (%) for 2007 > Poverty Rate (%) for 2007 > Unemployment Rate (%) for 2007 > GDP Rate (%) for 2007 > Discount Rate (%) for Dec 2007 > > **Plot all of the above on 1 (one) graph to show their relationship.** \* > > Now, this isn’t a multi-year plot of the variables… it’s just going to be a chart with Unemployment Rate sitting in a line with Inflation Rate and GDP Rate. > I feel like plagiarizing some of Louis Black’s lines upon hearing a certain conversation about a girl and her horse. > My head really wants to explode… Maybe you’re supposed to calculate the yearly inflation rate (%) for each individual month (i.e, Jan’06-Jan’07, Feb’06-Feb’07, etc.) and then plot that? But yeah, horribly worded question. ---
**Author:** ![iwakura43](https://avatars.discourse-cdn.com/v4/letter/i/9de0a6/32.png) [@iwakura43](https://boards.straightdope.com/u/iwakura43)\ **Post date:** [December 11, 2008, 5:56pm UTC](https://boards.straightdope.com/t/interpretation-what-is-inflation/476489/15 "2008-12-11T17:56:45Z")
> [@Jackknifed\_Juggernaut](#): > > Because it excludes substitute or alternative goods, many economists think that the CPI overstates actual inflation. This is [controversial](http://www.investopedia.com/articles/07/consumerpriceindex.asp?viewed=1). I believe inflation is understated by CPI (and don’t get me started on “core CPI”). [QUOTE=Investopedia] The new methodology takes into account changes in the quality of goods and substitution. [/QUOTE]