1. What is the CPI With Base Year?

The Consumer Price Index (CPI) with base year is a measure that examines the weighted average of prices of a basket of consumer goods and services, comparing current prices to prices in a specified base year.

2. How Does the Calculator Work?

The calculator uses the CPI equation:

Where:

• Current Price — Price of the item in current period (currency)
• Base Year Price — Price of the same item in base year (currency)

Explanation: The equation calculates the price change relative to the base year, with the base year index set to 100.

3. Importance of CPI Calculation

Details: CPI is crucial for measuring inflation, adjusting salaries and pensions, and making economic policy decisions. It helps compare purchasing power over time.

4. Using the Calculator

Tips: Enter both current price and base year price in the same currency units. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What does a CPI of 120 mean?
A: A CPI of 120 means prices have increased by 20% compared to the base year (when CPI was 100).

Q2: How is base year selected?
A: Base year is typically a normal economic year without major disturbances, updated periodically to remain relevant.

Q3: What's the difference between CPI and inflation rate?
A: CPI measures price levels, while inflation rate measures the percentage change in CPI over time.

Q4: Why use 100 as base year value?
A: Using 100 makes percentage changes easy to calculate and understand (e.g., 120 = 20% increase).

Q5: Can CPI be less than 100?
A: Yes, if current prices are lower than base year prices, CPI will be below 100 indicating deflation.