Lecture_Notes_7

# Lecture_Notes_7 - The CPI and the Cost of Living CHAPTER 7...

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The CPI and the Cost of Living CHAPTER 7

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7.1 THE CONSUMER PRICE INDEX Consumer Price Index (CPI): It is a measure of the average of the prices paid by urban consumers for a fixed market basket of consumer goods and services. The Bureau of Labor Statistics (BLS) calculates the CPI every month, and these numbers are used to compare what the fixed market basket costs this month with what it cost in some previous month or other period.
7.1 THE CONSUMER PRICE INDEX Reading the CPI Numbers: The CPI is defined to equal 100 for a period called the reference base period. Currently, the reference base period is 1982 - 1984. That is, the CPI equals 100 on the average over the 36 months from January 1982 through December 1984.

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7.1 THE CONSUMER PRICE INDEX In May 2005, the CPI was 194.4. The average of the prices paid by urban consumers for a fixed market basket of consumer goods and services was 94.4 percent higher in May 2005 than it was on the average during 1982 - 1984. In April 2005, the CPI was 194.6. The average of the prices paid by urban consumers for a fixed market basket of consumer goods and services decreased by 0.2 of a
7.1 THE CONSUMER PRICE INDEX Constructing the CPI Three stages: Selecting the CPI basket Conducting the monthly price survey Calculating the CPI

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7.1 THE CONSUMER PRICE INDEX The first stage in constructing the CPI is to determine the CPI market basket . The “basket” contains the goods and services
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## This note was uploaded on 06/21/2011 for the course ECON 201 taught by Professor Staff during the Spring '08 term at Northern Virginia Community College.

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Lecture_Notes_7 - The CPI and the Cost of Living CHAPTER 7...

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