Theoretically speaking, there are two methods to calculate the inflation: CPI and GDP deflator. Although these two methods might have different results, the difference would be normally very slight and the calculation based on CPI tends to get higher inflation rates than the one based on GDP deflator. However, the Chinese inflation is paradoxical to the above normal result. Specifically, the results from two methods are hugely different and the calculation based on CPI is far less than the one based on GDP deflator. This paper aims to discuss the possible reasons for these paradoxical results in China. Researchers assert that it is the exclusive of the household price and rental price that play the most important role in these paradoxical results.
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