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Use the rule of 70 to understand how much the price level changes in 100 years...

  1. Use the rule of 70 to understand how much the price level changes in 100 years with a 3% rate of inflation
  2. What is a market basket of goods and services and how is it used to calculate the Consumer Price Index?
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Answer #1

Rule of 70 says that it will take (70 / Annual growth rate) years to double the price level. Thus it will take (70 / 3) = 23.33 years to double the price. As (100 / 23.33) = 4.2857, it will take prices to 4.2857 times of current price level in 100 years.

Market basket contains goods which consumers usually consumes for daily consumption. Rise in cost of basket helps in calculating CPI and there by inflation.

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