Tracking inflation (article) | Inflation | Khan Academy thumbnail
Tracking inflation (article) | Inflation | Khan Academy
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Note that the index number in the base year always has to have a value of 100. First, index numbers have no dollar signs or other units attached to them. Although index numbers can be used to calculate a percentage inflation rate, the index numbers themselves do not have percentage signs. Index numb
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  • Note that the index number in the base year always has to have a value of 100.
  • First, index numbers have no dollar signs or other units attached to them. Although index numbers can be used to calculate a percentage inflation rate, the index numbers themselves do not have percentage signs. Index numbers just mirror the proportions found in other data. They transform the other data so that the data are easier to work with.
  • Second, the choice of a base year for the index number—that is, the year that is automatically set equal to 100—is arbitrary. It is chosen as a starting point from which changes in prices are tracked. In official inflation statistics, it is common to use one base year for a few years and then to update it so that the base year of 100 is relatively ...

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