We may correct for inflation by dividing the data by an appropriate Consumer Price Index and multiplying the result by 100, as we’ve seen.
How are inflation-adjusted prices calculated?
The original sales amounts were divided by the 2010 CPI and then multiplied by 100 to get the inflation-adjusted values. 206344, for example, equals (130683/63.33)x100.
How are price level adjustments calculated?
The average price of products and services in the economy might rise or fall over time. Subtract the base index from the new index and divide the result by the base index to get the percentage change in price levels.
Why do we make inflation adjustments?
Prices must, however, be adjusted for inflation in the face of inflation in order to be compared in constant money terms through time and to establish whether producers and consumers are better off or not.
What does it mean to say “adjusted for inflation”?
Adjusted for inflation refers to the percentage rise or fall in the Index during the applicable adjustment period, whichever is greater.