ANSWERS: 2
  • 1) "A consumer price index (CPI) is an index number measuring the average price of consumer goods and services purchased by households. It is one of several price indices calculated by national statistical agencies. The percent change in the CPI is a measure of inflation. The CPI can be used to index (i.e., adjust for the effects of inflation) wages, salaries, pensions, or regulated or contracted prices. The CPI is, along with the population census and the National Income and Product Accounts, one of the most closely watched national economic statistics." Source and further information: http://en.wikipedia.org/wiki/Consumer_price_index 2) "In economics, the inflation rate is a measure of inflation, the rate of increase of a price index (usually some form of consumer price index). Equivalently, the rate of decrease in the purchasing power of money. It's used to calculate the real interest rate, as well as real increases in wages, and official measurements of this rate act as input variables to COLA adjustments and Inflation derivatives prices." Source and further information: http://en.wikipedia.org/wiki/Inflation_rate Further information: http://www.inflationdata.com/Inflation/Articles/Difference.asp 3) The Consumer Price Index Controversy: "Originally, the CPI was determined by comparing the price, in two different periods, of a fixed basket of goods and services. Determined as such, the CPI was a cost of goods index (COGI). However, over time, the U.S. Congress embraced the view that the CPI should reflect changes in the cost to maintain a constant standard of living. Consequently, the CPI has been moving toward becoming a cost of living index (COLI)." "However, critics view the methodological changes and the switch from a COGI to a COLI focus as a purposeful manipulation that allows the U.S. government to report a lower CPI." Source and further information: http://www.investopedia.com/articles/07/consumerpriceindex.asp
  • is it good to have a high CPI rate ? meaning what is the nature of the relationship between cpi and inflation rate, if one goes up does the other go down ?

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