Summary
Inflation and deflation describe long-term trends in prices. Inflation means that the same things cost more than they did before, and deflation means they cost less. When a business decision spans several years, or the inflation rate is significant, inflation should be factored into the decision analysis. The chapter covered the following major points:
A price index measures inflation as the ratio (expressed as a percentage) of the historical price of goods or services at some point in time to the price of those same goods or services at another point in time.
Two common price indices are used in the United States, the Consumer Price Index (CPI) and the Producer Price Index (PPI).
The CPI measures price change from the retail purchaser's ...
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