CPI

Question 1

CPI stands for

Answer 1

Consumer Price Index

Question 2

CPI

Answer 2

• Measures the typical consumers cost of living

- The basis of cost of adjustment (COLAs) in many contracts and Social Security

Question 3

How is the CPI calculated?

Answer 3

1. Fix the “basket.”: The Bureau of Labor Statistics (BLS) surveys consumers to determine what’s in the typical consumer’s “shopping basket.”
2. Find the prices: The BLS collects data on the prices of all the goods in the basket.
3. Compute the basket’s cost: Use the prices to compute the basket’s total cost.
4. Choose a base year and compute the index: The CPI in any year equals.
5. Compute the inflation rate: The percentage change in the CPI from the
   preceding period.