The consumer price index or CPI is a more direct measure than per capita GDP of the standard of livi

The consumer price index or CPI is a more direct measure than per capita GDP of the standard of livi

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

View Full Document Right Arrow Icon
The consumer price index or CPI is a more direct measure than per capita GDP of the  standard of living in a country. It is based on the overall cost of a fixed basket of goods  and services bought by a typical consumer, relative to price of the same basket in some  base year. By including a broad range of thousands of goods and services with the fixed  basket, the CPI can obtain an accurate estimate of the cost of living. It is important to  remember that the CPI is not a dollar value like GDP, but instead an index number or a  percentage change from the base year.  Constructing the CPI  Each month, the Bureau of Labor Statistics publishes an updated CPI. While in practice  this is a rather daunting task that requires the consideration of thousands of items and  prices, in theory computing the CPI is simple.  The CPI is computed through a four-step process. 
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

Ask a homework question - tutors are online