How do they convert to 2020 dollars and vice versa?

Question

I often read things where it will say something like “It cost X$ in 1970, the equivalent of Y$ today”. Or the other way around. Is it tied into a single thing, like the price of gold? Or is it something more esoteric like the Federal interest rate? Do all sources figure it the same way? How accurate is it? I.E. if it is tied to the price of gold or something, can you look back and see that that was the price of a loaf of bread?

In: Economics

Answer 1

The government tracks inflation by monitoring the price of many things and weighting them all based on their contribution to everyone’s cost of living. It’s a complex process and difficult over very long periods because our way of life changes.