: Why does adjusting for inflation work? In my experience, different products change price at different rates. Even household staples such as bread or cleaning products don't change the same at the same time. So, when talking

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So, when talking about the past and saying "adjusted for inflation, today it would be...", what rates are we really looking at?

For various reasons, such as money supply, fiscal policy, interest rates, etc., The "value" of a currency changes over time. USUALLY currency gets less valuable over time, but on occasion it will stagnate or even appreciate. What you are looking at is the relative purchasing power of that currency over time.

Where do these generic numbers really even come from?

Economists look at the prices for a broad "basket" of goods and services to see how they change over time. The prices are obtained by surveying thousands of retailers, service providers, and other commercial businesses to come up with a general average of the "purchasing power" of the currency. It is VERY inexact science.

what rates are we really looking at?

You're looking at an estimate of the change in purchasing power over time of the currency. It should only be used to evaluate the currency and the economy as a whole, but is often used in specific situations like you mention, even though it should not be used that way.

how can we apply the same percentage to large packages like vacations?

You can't. Inflation is a completely MACRO-economic measure. It cannot be applied directly to individuals, individual goods, or to localized prices (gasoline prices in Texas change differently than they do in New York).

What you could look at is the historical change in price of those packages (if you can get that information) to see how they've changes over time, but that is still inexact since it does not guarantee that the prices will change the same way going forward.