Calculate the inflation rate for Year 1 vs Base Year.

The formula for inflation rate is:

For Year 1 vs Base:

For Year 2 vs Base:

For Year 3 vs Base:

The inflation rates are:

• Year 1 vs Base: \boxed{\text{8%}}
• Year 2 vs Base: \boxed{\text{19%}}
• Year 3 vs Base: \boxed{\text{32%}}

The formula for real income is:

Given Nominal Salary = K18,000 and Base Year CPI = 100.

For Year 1:

For Year 2:

For Year 3:

The real incomes are:

• Year 1: $\boxed{\text{K16,666.67}}$
• Year 2: $\boxed{\text{K15,126.05}}$
• Year 3: $\boxed{\text{K13,636.36}}$

Comparing the real incomes:

• Year 1: K16,666.67
• Year 2: K15,126.05
• Year 3: K13,636.36

The worker is worst off in $\boxed{\text{Year 3}}$. This is because the real income in Year 3 (K13,636.36) is the lowest, meaning their purchasing power has been eroded the most by inflation compared to the other years.

The Quantity Theory of Money states that $MV = PT$, where $M$ is the money supply, $V$ is the velocity of money, $P$ is the price level, and $T$ is the volume of transactions (or real output). Assuming that the velocity of money ($V$) and the volume of transactions ($T$) remain relatively constant in the short run, an increase in the money supply ($M$) directly leads to a proportional increase in the price level ($P$). Therefore, the inflation observed in Year 3 could have been caused by a significant $\boxed{\text{increase in the money supply}}$ ($M$) in the economy.