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Measuring Inflation. Consumer Price Index. measures changes through time in the price level of consumer goods and services purchased by households. Measured monthly, quarterly, and yearly

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consumer price index
Consumer Price Index
  • measures changes through time in the price level of consumer goods and services purchased by households.
  • Measured monthly, quarterly, and yearly
  • Those goods and services purchased by households that are analyzed are grouped together and called a “market basket.”
market basket
Market Basket
  • FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
  • HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
  • APPAREL (men's shirts and sweaters, women's dresses, jewelry)
  • TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
market basket continued
Market Basket Continued….
  • MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
  • RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
  • EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
  • OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
cpi and inflation
CPI and Inflation
  • By looking at the percentage change in CPI from year to year, economists can identify the amount of inflation that has occurred in the economy