CHAPTER 23MEASURING THE COST OF LIVING515Inflation rate in year 2 ±²100.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 priceindex and the inflation rate. The BLS collects and processes data on the prices ofthousands of goods and services every month and, by following the five foregoingsteps, 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 thenext 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 withinthe country (such as Boston, New York, and Los Angeles) and for some narrowcategories of goods and services (such as food, clothing, and energy). It also calcu-
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