Measuring the Economy 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. 1. The fixed basket of goods and services is defined. This requires figuring out where the typical consumer spends his or her money. The Bureau of Labor Statistics surveys consumers to gather this information. 2. The prices for every item in the fixed basket are found. Since the same basket of goods and services is used across a number of time periods to determine changes in the CPI, the price for every item in the fixed basket must be found for every point in time. 3. The cost of the fixed basket of goods and services must be calculated for each time period. Like computing GDP, the cost of the fixed basket of goods and services is found by multiplying the quantity of each item times its price. 4.
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This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.