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Principles of Economics- Mankiw (5th) 499

Principles of Economics- Mankiw (5th) 499 - CHAPTER 23...

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CHAPTER 23 MEASURING THE COST OF LIVING 515 Inflation rate in year 2 ±² 100. In our example, the inflation rate is 75 percent in 2002 and 43 percent in 2003. Although this example simplifies the real world by including only two goods, it shows how the Bureau of Labor Statistics (BLS) computes the consumer price index and the inflation rate. The BLS collects and processes data on the prices of thousands of goods and services every month and, by following the five foregoing steps, determines how quickly the cost of living for the typical consumer is rising. When the bureau makes its monthly announcement of the consumer price index, you can usually hear the number on the evening television news or see it in the next day’s newspaper. In addition to the consumer price index for the overall economy, the BLS cal- culates several other price indexes. It reports the index for specific regions within the country (such as Boston, New York, and Los Angeles) and for some narrow categories of goods and services (such as food, clothing, and energy). It also calcu-
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