What is the Consumer Price Index (CPI)?
Definition
The Consumer Price Index (CPI) is a measure of the average change in prices paid by consumers for a basket of goods and services.
Purpose
The CPI is used to track inflation and measure the purchasing power of consumers. It is also used by governments to make economic policy decisions.
How it Works
The CPI is calculated by the Bureau of Labor Statistics (BLS) by tracking the prices of a representative basket of goods and services purchased by households. The basket is updated every two years to reflect changes in consumer spending patterns.
Importance
The CPI is an important economic indicator that provides insights into inflation, consumer spending, and the overall health of the economy.
Limitations
However, the CPI has some limitations. It does not measure the prices of all goods and services, and it can be affected by changes in consumer spending patterns.
Recent Trends
In recent years, the CPI has been rising steadily. This is due to a number of factors, including supply chain disruptions and rising energy costs.
Conclusion
The CPI is a valuable tool for tracking inflation and understanding consumer spending. It is important to be aware of its limitations, but it remains a key indicator of the overall health of the economy.
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