Enter the current price level (for example, a CPI value) and the past price level into the Deflation Rate Calculator. The calculator will evaluate the deflation rate (the percent decrease in the price level from the past period to the current period).
Deflation Rate Formula
The following example problems outline the steps and information needed to calculate the Deflation Rate from a past price level and a current price level.
DR = ((P2-P1) / P2)\cdot 100
- Where DR is the Deflation Rate (%)
- P1 is the current price level (e.g., current CPI)
- P2 is the past price level (e.g., past CPI)
To calculate the deflation rate, divide the decrease in the price level (past minus current) by the past price level, then multiply by 100.
How to Calculate Deflation Rate?
The following example problems outline how to calculate Deflation Rate.
Example Problem #1:
- First, determine the current price level (e.g., CPI).
- The current price level is given as: 95.
- Next, determine the past price level (e.g., CPI).
- The past price level is provided as: 100.
- Finally, calculate the Deflation Rate using the equation above:
DR = ((P2-P1) / P2) * 100
The values provided above are inserted into the equation below and computed.
DR = (100-95) / 100*100 = 5.00 (%)
Example Problem #2 (Practice):
For this problem, the variables required are provided below:
current price level (e.g., CPI) = 96
past price level (e.g., CPI) = 100
Test your knowledge using the equation and check your answer with the calculator.
DR = ((P2-P1) / P2) * 100 = ?
