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Assume There Are Two Goods in an Economy: Bread and Bottled

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Assume there are two goods in an economy: bread and bottled water. Assume bread sells for $2 per loaf and water sells for $1 per gallon the first year and in the second year the price of a loaf rises to $2.50 and bottled water rises to $1.25. Why is averaging these two prices meaningless in terms of trying to figure out whether or not there is inflation in the economy?

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The problem is that you can take the ave...

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