The formula for calculating the CPI is CPI = (the value of a fixed set of goods at current period prices) divided by (the value of a fixed set of goods at base period period prices) multiplied by 100. The CPI tells how much more it costs today than at some point in the past for the average household's expenditures to purchase a representative set of goods, for example, if the average household in a country spent $800 per month on a set of goods in 1995, and $1,000 on that set of goods in 2000, then the country's Consumer Price Index for 2000 would be (with 1995 as the base period) CPI= 1000/800*100=125, which means a 25% increase. On a daily basis we are more interested in the inflation rate, which is defined as the percentage change in the price level from one period to another, with the formula T = (P1-P0)/P0, where T is the inflation rate in period 1, and P1 and P0 denote the price level in periods 1 and 0, respectively. If the consumer price index (CPI) introduced above is used to measure the price level, the inflation rate is the percentage change in the CPI from one period to another. If an economy's CPI increased from 100 last year to 112 this year, then the inflation rate for that period would be T=(112-100)/100*100%=12%, which means that the inflation rate is 12%, which is expressed as a 12% increase in prices.