Consumer price index or CPI measures the weighted average of price of a basket of consumer goods which contains goods and services such as food items, medical, housing, transportation, education, apparel,recreation etc.CPI is measured by taking the price changes for each item in the basket and averaging them.
It is very important because it is used to determine the cost of living and is widely used to measure the inflation which gives and indicator the effectiveness of the government policies and welfare measures such as social security and also helps the government in taking appropriate decisions to formulate future policies.
How does the "consumer price index" measure inflation and why is this important
1. The index used to measure inflation is the a consumer price index. b. producer price index. c. wholesale price index. d. GDP deflator. 2. The price index in year 2 is 110 and the price index in year 3 is 115. The rate of inflation between years 2 and 3 is a. 1.04%. b. 2.04%. c. 4.17%. d. 4.55% 3. The situation that occurs when the inflation rate falls is called a. deflation b. disinflation c. stagflation d. inflation 4. The situation that occurs when the price level falls is called a. deflation b. disinflation c. stagflation d. inflation 5. The situation that occurs when...
The Consumer Price Index (CPI) is just one price index that we use to measure inflation. The CPI was 33.4 in 1967 and 160.5 in 1997. Dividing 160.5 by 33.4 yields a factor of 4.8, so if Dr. Evil thought that one million dollars was a lot of money in 1967, an equivalent amount in 1997 would be $4.8 million. Imagine if you were cryogenically frozen in the 1960s and revived 30 years later. Changes in societal behavior, advances in...
Suppose that the Consumer Price Index (CPI), a widely used measure of inflation in the U.S., rose from 100 in one year to 120 during the next year. The rate of inflation between the two (2) years is A. 120%. B. 220%. C. 20%. D. Cannot be determined without further information.
1. Explain briefly what the consumer price index is trying to measure and how it is constructed. 2. Henry Ford paid his workers $5 a day in 1914. If the U.S. consumer price index was 10 in 1914 and 195 in 2005, how much is the Ford daily paycheque worth in 2005 dollars? 3. Describe the three problems that make the consumer price index an imperfect measure of the cost of living. 4. If the price of a military aircraft...
In what 2 ways does the consumer price index overestimate the rate of inflation
in what 2 ways does the consumer price index overestimate the rate of inflation
What is the Consumer Price Index (CPI) and how is it determined each month? How does the Bureau of Labor Statistics (BLS) calculate the rate of inflation from one year to the next? What effect does inflation have on the purchasing power of a dollar? How does it explain differences between nominal and real interest rates? How does deflation differ from inflation? (Answer in your own words)
3. What does the consumer price index measure? List three ways in which it differs from the GDP deflator
14. In the US the Consumer Price Index is compiled by the Bureau of Labor Statistics and serves as a: A) Measure of changes in the relative prices of the most important consumer goods and services. B) Measure of changes in the price of all goods and services during one year period. C) Is referred as the cost-of-living index and measures changes in the average price of consumer goods and services. D) Measure to determine how the economy is functioning...
If inflation is estimated by an index like the consumer price index (CPI) to be higher than it actually is, who is liable to be hurt by the error? a corporations that adjust worker salaries to keep pace with inflation b entrepreneurs who borrow from banks at a fixed rate of interest c consumers who pay a fixed percentage of purchases as sales tax d workers whose negotiated union wages include an inflation adjustment e people whose Social Security incomes...