A price index represents the cost of a market basket of goods and services today as a percentage of the cost of the same market basket in a base year divided by the cost of a market basket in a year.
Market Basket
A preset list of things in predetermined quantities is referred to as a market basket or commodities bundle. Its most common use is to follow the development of inflation in an economy or market. Specifically, to keep tabs on how the value of money alters over time. To ascertain the value of money in various areas, the purchasing power parity principle is also combined with a market basket.
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