CPI: A Measure of Inflation
What is the Consumer Price Index?
The Consumer Price Index (CPI) measures the overall change in consumer prices based on a representative basket of goods and services.
How is the CPI Calculated?
The CPI is calculated by tracking the prices of a fixed basket of goods and services, such as food, housing, transportation, clothing, and medical care. The basket is designed to represent the typical spending patterns of urban consumers.
What does the CPI tell us?
The CPI provides a measure of inflation, which is the rate at which consumer prices are rising. It helps policymakers, businesses, and investors understand the overall trend in consumer prices and make informed decisions.
Limitations of the CPI
While the CPI is a widely used measure of inflation, it has some limitations. It does not capture changes in the quality of goods and services, and it may not accurately reflect the spending patterns of all consumers.
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