Quote:
Originally Posted by OrangeBlossomBaby
So - here's how it works:
Widgets were invented 10 years ago, and were $1 each.
Last year, you needed a widget. Last year, widgets cost $9 each.
This year, the same widget is $3.
Yes - it's up from when it first came out on the market. But it's much less than it was last year.
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The above example scares me. I guess, if I read the words and it were a true or false statement for a first grader, I would have to say - True.
But that is not the issue. The issue was the current month's inflation index was 3%.
You stated that the inflation rate is down to 3%. That means that inflation was up
"this month" at an annual rate of 3 per cent. It does not mean that the prices went up by 3% this month but only that if that rate continued at that level for 12 months it would be an annual rate of 3%. Likewise, it does not negate any of the price rises that have occurred in the past.
A single item does not follow the inflation rate cost. It is a basket of goods the government uses to determine "the rate" of inflation. Simply stated, that if that basket was $100 last year and the "annual" rate of inflation for the last 12 months was 10 %. (I am not compounding). The basket would now cost $110. If this month's inflation rate was plus 3% and stayed that way for a year, The price would be $113.30.
Am I misinterpreting?