The formula to calculate the deflation rate is:
\[ \text{DR} = \left(\frac{\text{I2} - \text{I1}}{\text{I2}}\right) \times 100 \]
Where:
The deflation rate measures the decrease in the general price level of goods and services in an economy over a period of time. It is calculated by comparing the current inflation rate to a previous period's inflation rate. A positive deflation rate indicates a reduction in prices, which can impact economic activity and purchasing power.
Let's consider an example:
Using the formula to calculate the deflation rate:
\[ \text{DR} = \left(\frac{5 - 2}{5}\right) \times 100 = 60 \% \]
This means that the deflation rate for this scenario is 60%.
