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To calculate the inflation rate from GDP, you need to use a formula that takes into account the nominal GDP and the real GDP. The nominal GDP represents the total value of goods and services produced in an economy at current prices, while the real GDP represents the same value at constant prices. By comparing the nominal and real GDP, you can calculate the inflation rate using the following formula:
Inflation rate = ((Nominal GDP – Real GDP) / Real GDP) x 100
This formula helps you measure the percentage increase in prices from one year to the next. The higher the inflation rate, the greater the increase in the general price level of goods and services in the economy. By calculating the inflation rate, you can better understand how the economy is performing and make more informed decisions about investments and other financial matters.
The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.
At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.