Consumer Price Index

Short Answer
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, used to track inflation.

Consumer Price Index

Definition

The Consumer Price Index (CPI) is a widely used economic indicator that measures changes in the price level of a market basket of consumer goods and services purchased by households. The CPI reflects the cost of living and is used to track inflation, which represents the rate at which the general level of prices for goods and services is rising.

The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them, with weights assigned based on their importance. The index is used by governments, central banks, and economists to assess inflationary trends, guide monetary policy, and make economic decisions. Additionally, CPI data is often used to adjust wages, pensions, and cost-of-living adjustments.

Consumer Price Index

Examples

  1. The Bureau of Labor Statistics (BLS) reporting a monthly increase in the CPI, indicating rising consumer prices.
  2. A central bank using CPI data to determine the need for changes in interest rates to control inflation.
  3. An employer adjusting employee salaries based on CPI to maintain purchasing power.

Consumer Price Index

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