jump to navigation

You were looking for what? (Or, search term questions.) October 26, 2017

Posted by tomflesher in Macro, Teaching.
Tags: ,

Occasionally I mine the search terms for interesting questions. Here are three from the past month:

  • What is an increase in CPI?

CPIWhen a country’s CPI increases, that means that, on average, the cost of living in the country has increased. The Consumer Price Index measures the price of a fixed basket of goods. For example, in the United States, CPI consists largely of housing costs, food and beverages, and transportation. When the price of any good in the basket goes up, it increases total basket expenditure, but the effects of (for example) increasing food costs would be greater than the effects of increasing costs of haircuts (included in the “Other” category). Although the BLS is careful to point out that the CPI is not a cost-of-living index, it functions a lot like one. (The chart was retrieved from the US Department of Labor website.)

The percentage change in CPI, otherwise called the CPI growth rate, is the most common measure of inflation.

  • if the cpi went up why not all the goods prices goes up? [sic]

This question gets the causation backwards. The CPI measures how much prices are changing; you can use the percentage change in CPI to measure how much, on average, prices have gone up, but that says very little about individual goods. For example, the Transportation category includes the price of gasoline. If cell phone bills decreased, but gasoline prices increased, the fact that we (on average) spend more money per year on gasoline than on phone bills (as reflected by the different weights, above) means that the gas price increase will have a greater effect on our overall spending.

CPI reflects those changes. It’s possible for the total cost of the basket of goods used to measure CPI to increase even if some of those goods had steady or even decreasing prices.

  • mastovesion is good or bad

You do you, gentle reader.



No comments yet — be the first.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: