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Measuring Inflation

Measuring Inflation. Consumer Price Index. measures changes through time in the price level of consumer goods and services purchased by households. Measured monthly, quarterly, and yearly

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Measuring Inflation

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  1. Measuring Inflation

  2. Consumer Price Index • measures changes through time in the price level of consumer goods and services purchased by households. • Measured monthly, quarterly, and yearly • Those goods and services purchased by households that are analyzed are grouped together and called a “market basket.”

  3. Market Basket • FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks) • HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture) • APPAREL (men's shirts and sweaters, women's dresses, jewelry) • TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)

  4. Market Basket Continued…. • MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services) • RECREATION (televisions, toys, pets and pet products, sports equipment, admissions); • EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories); • OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

  5. CPI and Inflation • By looking at the percentage change in CPI from year to year, economists can identify the amount of inflation that has occurred in the economy

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