Inflation refers to the phenomenon that the price rises continuously and generally for a period of time because the money supply exceeds the actual demand for money. Its essence is that the total social demand is greater than the total social supply, which is manifested in the depreciation of paper money and the rise of prices. Its degree is measured by the inflation rate.

Inflation rate = price index-1. Index is a relative number, reflecting the relative change index of a phenomenon compared in two periods. Simply put, 1 clothes sold at the beginning of the year 100, sold at the end of the year 1 10. The price at the end of the year is 1 10% of the price at the beginning of the year, and the price has increased by 10%.

After understanding the calculation method of inflation rate, we will work out the price index. The price index can be calculated in different ways in the actual implementation process. Products are divided into consumer goods and means of production. If we only consider the price level of consumer goods, we will get the retail price index, that is, the consumer price index (CPI).