Structural unemployment . Unemployment is an excess supply of labor resulting from a failure of coordination in the market economy. Inflation Inflation is defined as an increase in the average price level in the economy. But a simple average won't do. The abbreviation CPI is often used for the Consumer Price Index.
Inflation is measured as a percentage change in the price index.
The Laspeyres Price Index is the cost of buying what people bought in the base year at the prices they pay in the current year, divided by the cost of the same goods and services at the prices actually paid in the base year, times 100. In Figure seven we see the increase in the price level from 1860 to 1995, based on three separate price indices. In January of 1918, the consumer price index was 47.70. Rates of Inflation Over 135 Years Figure 8 shows the rate of change the price level, that is, the rate of inflation, based on the same three price indices. Thinking in terms of supply and demand, price inflation could be caused in one or both of two ways.