00:01
Hey guys and welcome to another economics example where we're going to be talking some more about inflation.
00:09
So this is actually a continuation of the last example where we filled out this table here with the amount spent for each year here.
00:23
So for this example, we're going to be trying to figure out the index number for each year.
00:31
And yeah, well, i'll try and go about telling you how to do that.
00:36
So the simplest way to do that is, so in this case, you would take your amount spent in the year you're trying to find out, say i, and divide it by the amount spent in the base year.
00:58
So spent b, and then just times that by 100.
01:01
And that'll give you your index number.
01:05
And then, you know, since you're in the base year, since you would be dividing the same number by itself and timesing it by 100, the base year will always have an index of 100.
01:15
So for this example, we'll use 2003 as the base year.
01:21
Now, i know i'm not supposed to be talking about the textbook very much, but the textbook in this case kind of has a very, confusing method that they use.
01:37
They come up with a weird other number that they use.
01:45
So what they do is because the base year has an index number of 100, and you know, you're dividing the spent number by some amount, what they do is they try and figure out what this amount is.
02:01
So they, you know, times it to the other side, divide it by 100.
02:06
And then they use this amount to calculate everything.
02:10
I would advise against that.
02:12
It's making the entire thing much more confusing than it needs to be.
02:16
So i would just advise sticking with this method because it is a lot simpler and you'll have a smaller headache for it...