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S E28: Inflation - When money loses its value

Think Like An Economist

CHAPTER

The Inflation Rate Is a Measure of the Rising Cost of Living

Inflation is not just a measure of the average rate at which pricesare rising, it's also a measure of. the rising cost of living. So inflation for you, naz was two %, which means that your cost a living rose by two%. I notice you mentioned a basket of goods. Yes. That's how people who measure inflation think about it. Because some prices are going up and some are going down, we need some way to figure out what's happening on average. They look at what people buy on average and figure out what’s the price of that basket. This basket reflects what peoplebuy on average. But for you,naz, you might buy

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