CH 6-7 - CH 6-7 Consumer Price Index: How to calculate...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CH 6-7 Consumer Price Index: How to calculate price change and monitor price level -chooses the four things that households spend the most money on. -Consumers use 42.4% of money on household (Mortgage, things for house) 1. We don’t all buy specific commodities 2. Not changed to reality 3. Not part of GDP More so, not a Reflection of GDP 4. Also includes 2 nd hand commodities How CPI changes from year to year : 1. CPI delays the introduction of new consumer technology: -Introduce cell phones to the market basket four years after cell phones, yet they were in heavy use for those four years. -Leads to an overestimation in inflation. 2. By in large the government does not monitor improvements in products -Leads to an overestimation in inflation. 3. If commodity changes year to year, but the government says that the price goes up, then CPI will go up, yet this is wrong. The commodity is not the same from the first year to the second. 4. Government goes to regular/conventional stores, however, Americans are tending to shop at discount stores like Walmart, and by monitoring these stores the government states that we pay more than we actually do. -Overestimating rate of inflation. -If government says that the inflation rate is around 2-3%, then it is actually around 1%,
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

CH 6-7 - CH 6-7 Consumer Price Index: How to calculate...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online