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1. Consumer Price Index (CPI)

Principles of Macroeconomics (with Xtra!)

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T he consumer price index (CPI) provides a broad measure of the cost of living in Canada. While there are other ways to measure price changes, the CPI is the most important indicator because of its widespread use, for example, to calculate changes in government payments such as the Canada Pension Plan and Old Age Security. Through the monthly CPI, Statistics Canada tracks the retail price of a CPI shopping basket made up of about 600 goods and services from the general categories of an average household’s expenditure - food, shelter, furniture, clothing, transportation, and recreation. The percentage of the total basket that any item occupies is termed the “weight” and reflects typical consumer spending patterns. Since people tend to spend more on food than clothing, changes in the price of food have a bigger impact on the index than, for example, changes in the price of clothing and footwear. Calculating the CPI Prices are measured against a base year. The base year is currently 1992 and the basket for that year is given the value of 100. In 1997,
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