The example in the appendix showed that the Student Price Index (SPI) rose by 42 percent from 1983 to 2007. You can understand the meaning of this better if you do the following:
a. Use Table to compute the fraction of total spending accounted for by each of the three items in 1983. Call these values the €œexpenditure weights.€

b. Compute the weighted average of the percentage increases of the three prices shown in Table Using the expenditure weights you just computed.
You should get 42 percent as your answer. This shows that inflation, as measured by the SPI, is a weighted average of the percentage price increases of all the items that are included in theindex.

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TABLE Prices in 2007 Increase over Item Price 1983 Hamburger $1.20 50% Jeans 30.00 25 Movie ticket 7.00 40