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For the overall U.S. market, how is inflation measured?

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Measuring inflation is a difficult problem for government statisticians. To do this, a number of goods that are representative of the economy are put together into what is referred to as a "market basket." The cost of this basket is then compared over time. This results in a price index, which is the cost of the market basket today as a percentage of the cost of that identical basket in the starting year.

In North America, there are two main price indexes that measure inflation:

Consumer Price Index (CPI) - A measure of price changes in consumer goods and services such as gasoline, food, clothing and automobiles. The CPI measures price change from the perspective of the purchaser. U.S. CPI data can be found at the Bureau of Labor Statistics.
Producer Price Indexes (PPI) - A family of indexes that measure the average change over time in selling prices by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. U.S. PPI data can be found at the Bureau of Labor Statistics.
For more info: http://www.investopedia.com/university/inflation/inflation2.asp

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In the United States market, inflation is measured through Consumer Price Index and Producer Price Indexes. This is because for the inflation to be stable, the two aspects should be stable and that means they should be equal. Read http://www.inflation-linked.com/howis.html.

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as the market price goes up..

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