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INFLATION
Inflation can be defined as a rise in the general price level and therefore a fall in the value of money. Inflation occurs when the amount of buying power is higher than the output of goods and services. Inflation also occurs when the amount of money exceeds the amount of goods and services available. As to whether the fall in the value of money will affect the functions of money depends on the degree of the fall. Basically, refers to an increase in the supply of currency or credit relative to the availability of goods and services, resulting in higher prices.
Therefore, inflation can be measured in terms of percentages. The percentage increase in the price index, as a rate per cent per unit of time, which is usually in years. The two basic price indexes are used when measuring inflation, the producer price index (PPI) and the consumer price index (CPI) which is also known as the cost of living index number.

How inflation is measured?
Inflation is normally given as a percentage and generally in years or in some instances quarterly and is derived from the Consumer Price Index (CPI).
However, there are two main indices used to measure inflation. The first is the Consumer Price Index, or the CPI. The CPI is a measure of the price of a set group of goods and services. The "bundle," as the group is known, contains items such as food, clothing, gasoline, and even computers. The amount of inflation is measured by the change in the cost of the bundle: if it costs 5% more to purchase the bundle than it did one year before, there has been a 5% annual rate of inflation over that period based on the CPI. You will also often hear about the "Core Rate" or the "Core CPI." There are certain items in the bundle used to measure the CPI that are extremely volatile, such as gasoline prices. By eliminating the items that can significantly affect the cost of the bundle (in either direction) on a month-to-month basis, the Core...