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An index number measures the evolution of the cost of living and is therefore an important indicator of a price increase or Inflation The increase in the general price level. The original meaning (literally “to blow up”) is monetary inflation, which means that the amount of money increases. Today, inflation primarily refers to price inflation. This means an implicit monetary depreciation. This causes the purchasing power to drop. inflation . The index not only measures the price level, but the fluctuation between two periods: the base or reference year and the current price.