How the inflation index of a coutry is arrived at ?

Question

how inflation rates of a country are worked out

Answer 1

Take goods and multiply by 30 then same into market price that how my teacher told!

Answer 2

Basically they take a basket of goods at the beginning of the year and determine the cost of those goods.  At the end of the year they take the same basket of goods and determine the new cost.  The inflation index is the per cent difference between the two.