Friday, September 12, 2014

Consumer Price Index (CPI)

A Consumer Price Index (CPI) examines the weighted average of prices of a basket of consumer goods and services purchased by households, such as transportation, food and medical care. The Consumer Price Index in the United States is defined by the Bureau of Labor Statistic as a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Changes in Consumer Price Index are used to assess price changes associated with the cost of living.

The annual percentage change in a Consumer Price Index is used as a measure of inflation.
A Consumer Price Index can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values. In most countries, the Consumer Price Index is one of the most closely watched national economic statistics.

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