The annual inflation rate is the percent change from one year to the next in the general level of prices. The CPI can be used to estimate the inflation rate using the formula

For instance, to estimate the inflation rate in 2006, use the CPI in 2006, 201.6, and the CPI in 2005, 195.3.

So, the inflation rate in 2006 was about 3.2%. The graph shows the inflation rate from 1931 through 2010.

Download the spreadsheet to access the data used to create the graph above and in Example 3.

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Based on this graph, it is hard to associate either party with inflation more than the other. We had Democratic presidents during most of the 1930s (no inflation) and 1940s (increasing inflation), a Republican president during the 1950s (stable inflation), and a Democratic president for most of the 1960s (rising inflation). During the 1970s, when inflation was at its worst, we had a Republican president during the early and middle part of the decade and a Democrat for the last few years. From the 1980s through the 2000s, when inflation was gradually decreasing, we had Republican, then Democratic, then Republican presidents. If you had to pick one, you could say the Democratic Party has been associated with inflation slightly more the Republican Party, but we haven't taken into account control of Congress, which belonged to the Democrats for most of the 1930s through the 1980s and has shifted back and forth since.