Answered: How does the CPI compare the cost of…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter6: Macroeconomic Measurements, Part I: Prices And Unemployment

Section: Chapter Questions

Problem 1QP

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How does the CPI compare the cost of the typical market basket of goods and services?

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CPI is a indicator in economics and it measures the change in price level of a weighted average market basket of goods and services. It takes the weighted average of prices of a basket of consumer goods and services, like food, transportation and medical care. It is then calculated by taking the changes in price for each item which is predetermined in the baskets of good and then it is averaged. CPI changes are used to asses changes in prices which is associated with the cost of living.

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