The rates of inflation calculated in Section 1 only account for goods that were produced in the sneaker economy. To the extent that humans cannot survive on a diet of Air Maxes and Yeezys, one would expect that a substantial fraction of the manufactured kicks are exported to another economy in exchange for nourishment such as bread, cheese, onions, and Beyond MeatTM or Impossible MeatTM. To measure how the cost of living changes over time, we thus often appeal to another, consumer-centric measure called consumer price index or CPI.

a) The CPI is typically calculated by fixing a particular basket of goods, whereas the GDP deflator from Section 1 must ? because the composition of production inevitably changes each period ? allow the basket of goods to change. Is there a mechanical reason why the CPI's basket of goods must be fixed or could we reasonably also construct an alternative measure of consumer inflation that accounts for people substituting across goods?

b) ) Visit the BLS to calculate what a 'Benji' (aka $100) in December 1913 ? when the Federal Reserve system was created ? would be worth as of July 2021? Using the same calculator, rewrite McDonalds' famous 'amazing menu' from 1950 in current terms (use July). Which items were cheaper then and which are cheaper now?

McDonald's Amazing Menu Pure Beef Hamburger. .... 15e Tempting Cheeseburger. .... 19 Triple-Thick Shakes..... 20 Golden French Fries..... 10 Thirst-Quenching Coke. ... ...10g Delightful Root Beer...... 10 Steaming Hot Coffee. . . .10g Full-Flavor Orange Drink... 10 Refreshing Cold Milk. ... .12%