1. Consumer Price Index (CPI)

Principles of Macroeconomics (with Xtra!)

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
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,
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern