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.
This is the end of the preview. Sign up
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.