Calculating CPI

CPI

Assume that in the “base year” (2006) the total expenditures were

 $48,398 for a family of four.

48,398

48,398  = 1 (rate of change).  1 x 100 = CPI of 100

Then, the 2007 total expenditures for the family were $48,898

48,898

48,398 = 1.01 (rate of change).  CPI = 101

Therefore:  Inflation would be =

101 – 100        1      

    100       = 100 =  .01 (x 100) = 1% inflation for the year

Example:

College Tuition for me versus you:

Mine  =  approx  $  1,200 a year

Yours =  approx $ 12,000 a year

12,000 – 1,200       10,800

    1,200      =      1,200   = 9 (rate of change) x 100 = 900% Inflation

                                                                                         

Tuition for your children

x – 12,000

  12,000     = 9 (rate), = x-12000 = 108,000, x = $120,000 a year