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
there is a socalled “basket of goods and services” which is designed to mirror “average” consumer spending.
this basket is updated regularly to reflect the actual spending (like people didnt buy smartphones in the 70s and they dont really buy record players anymore these days).
by tracking the prices for goods inside this basket from one year to the next they can calculate “inflation” aka the rate at which the general cost of living increased. (prices dont automatically go up, and in some sectors they actually go down over time, but in general the cost of living increases over time)
since we’ve done that for decades now, we can just take the price from <insert old date here> and multiply it by the cumulated inflation rate (= the rate you get if you add the yearly inflation from each year to the next until you get to today).
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