Question

Which most accurately characterizes the method used to calculate inflation? Bureaucrats evaluate changes in the price of a nation's currency in terms of other prominent world currencies. Economists measure change in the prices of three goods (gasoline, gold, and wheat) thought to be important determinants of the health of the economy. Analysts measure the cost of a bundle of goods representative of overall spending at two points in time and compare the difference in cost. Government workers poll households to find out how much change there is in the prices that they are paying. Researchers observe the interest rate at two points in time and infer the rate of inflation from the difference.

Answer 1

Answer:

Analysts measure the cost of a bundle of goods representative of overall spending at two points in time and compare the difference in cost.

Explanation:

Inflation refers to a situation in which there is a rise in the price level of the goods in an economy at a particular point of time.

For determining inflation, we need to compare the cost of buying certain baskets of goods in the current year and the cost of buying same basket of goods in the previous year. So that we are able to find the exact rise in the price level of the goods.

We need to analyse the cost of the same basket of goods for the two different periods. Hence, we will get the most appropriate values of the inflation.