Consumer Price Index

Topics: Inflation, Consumer price index, Price index Pages: 3 (1015 words) Published: April 26, 2011
Consumer Price Index
The Consumer Price Index (CPI) is a measure of change in prices over a period of time. The CPI is made up of a fixed basket of goods that is used to determine one’s CPI. The basket of goods consists of services and goods like food, education, transportation, apparel, housing, and beverages. Some examples of these goods are cereal, milk, cheese, prescription drugs, jewelry and new vehicles (“Consumer Price Index” 2010). The basket of goods are reviewed every ten years, which is a major downside to the CPI because it doesn’t keep the system up-to-date. Another major downside to the CPI is it only takes in account people from urban areas and does not accurately reflect the people living in rural areas. This is a downside because 65-75% of our population lives on the coastline. A major use of the CPI is adjusting the dollar value. “The CPI is often used to adjust consumers' income payments (for example, Social Security) to adjust income eligibility levels for government assistance and to automatically provide cost-of-living wage adjustments to millions of American workers” (“Consumer Price Index” 2010). Another use of the Consumer Price Index is it acts as a deflator of other economic series. Examples of these series adjusted include retail sales and hourly/weekly earnings (“Consumer Price Index” 2010). The CPI shows the rate of inflation and deflation over a certain period of time. In order to calculate deflation or inflation you need to first calculate the CPI for your starting and ending dates. To calculate the CPI you take the basket of goods for the current year divided by the basket of goods for the base year then times that by one hundred. The cost to attend a reputable university is rapidly rising in many aspects. The cost of going to school at West Chester University for instate students is roughly 14,600 thousand dollars per year. “For the 2007/2008 academic year, tuition and fees at four-year public colleges rose an average of 6.6...
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