Bureau Of Labor Statistics: Understanding The Consumer Price Index

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As the price of goods and services are constantly changing, it is important for us to understanding the Consumer price Index. Consumer price index (CPI) is a measure of the weighted average change over time in the purchase price of consumption by urban households for a set of goods and services. The Bureau of Labor Statistics (BLS) has arranged all the expense items into eight major categories, such as food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, along with other goods and services. The CPI is often referred as the cost-of-living index, but it doesn’t measure the exact data. There is no official result of cost-of-living index by the government, so CPI is as close as it gets.…show more content…
It provides data about product value changes in the Nation's economy to government, business, work, and private natives and is used by them as a guide for settling on monetary choices. Also, the President, Congress, and the Federal Reserve Board use CPI to help define financial situations and economic decisions. CPI can also escalate a particular dollar value with time and preserving buying power of a given dollar value. Examples of series adjusted by the CPI include retail sales, hourly and weekly wages, and components of the National Income and Product Accounts. So basically, as product prices increase, the purchasing power of the consumer's dollar declines. Inflationary problems occur when we experience unexpected inflation which is not unbalance with people’s incomes. If incomes do not increase along with the prices of goods, everyone’s purchasing power will be negatively affected, which can lead to a slower economy. While there are disadvantages to inflation, many economists states that we actually need it to keep our economy moving forward. A healthy rate of inflation will results in an increase of wages, profitability in businesses, and keeps the capital flowing. An ideal rate of inflation is approximately 2-3% per year. The goal is for inflation to outpace the growth of the underlying economy by a small amount per year. However, I believe that if one thing increase in price, everything else will also increase. For example, when minimum wage increase, the price of goods and services will eventually increase too. Which it will resulting in a decrease of demand, and an increase in
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