Question: There is another way to calculate inflation. Suppose that you used the more recent (1977) year's purchases as the market basket instead of the 1970 one you used in Problem. Is the inflation rate you calculate any different? Which one is correct? Why does the government not compute inflation both ways? Explain.
Problem: Using 1970 as the base year, calculate the inflation rate based on the hypothetical market basket shown below. If a worker made $100 per week in 1970 and $125 per week in 1977, would he or she have gained or lost to inflation?
