Consumer Price Index
The consumer price index (CPI) measures vicissitudes in the price level of a marketplace basket of consumer services and goods bought by homes. By closely observing the consumer price index one can easily watch the changes in the price level of a good or service, this can help in determining the rate of inflation. Inflation rate is the variation of the price level over a given period.
Many business research institutions use the consumer price index to calculate the rates of inflation as well as determine how the economy of a country progresses, there is a predefined method of making use of the CPI to calculate the rate of inflation. The CPI is a numerical approximation built using the prices of a sample of symbolic things whose prices collection is sporadic
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Additionally, the CPI checks the prices of a stable marketplace basket of goods and services, which is not certainly a good thing for somebody concerned about the price level of the economy’s present production (Mankiw, 2011). Using CPI to calculate the rates of inflation for a given country can at times be a tricky affair if not well carried out.
Barro, R. J. (2008). Macroeconomics: A modern approach. Mason: Thomson.