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2011 - Econ21.13.2011 CoreCPI Veryvolatile, OverallCPI...

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Econ 2 1.13.2011 Core CPI Gets rid of food and energy prices. Very volatile, swing a lot and doesn’t give a good understanding of how  overall prices are changing Overall CPI Weight Fraction of expenditure? Consumer price index:cpi Most often used measure of the aggregate price level o It is an answer to the following question: If the average household were to buy exactly the same bundle  of goods and services today that it bought in year “x”, how much  more or less expensive would it be? A price index calculated as the current cost of a fixed basket of  consumer goods divided by the cost of the basket in the base period. Calculating the cpi Pick a base year Determine a basket of goods consumed by an average urba family Bls sends their minions to stores every month to survey prices on  these items. Compute the cost of the same basket each year Compute inflation Cpi
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cpi=cost of baseyear basket in year t/cost of base year basket in the  base year*100 calculating cpi for our apples and oranges example: o base year=year 1:2 apples and 3 oranges inflation
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