Starting from a base (or reference) year, a price index Pt represents the price of the commodity bundle over time t. In base year zero, P0 is set to 100. If for example the base year is 1992, real values are expressed in constant 1992 dollars, based at 100 for 1992. Also imagine for example, that the price of the commodity bundle has increased in the first year by 1%, then Pt rises from P0 = 100 to P1 = 101.
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