CPI and inflation

CONSUMER PRICE INDEX:

*A consumer price index (CPI) is an index number measuring the average price of consumer goods and services purchased by households. It is one of several price indices calculated by national statistical agencies. The percent change in the CPI is a measure of inflation. The CPI can be used to index (i.e., adjust for the effects of inflation) wages, salaries, pensions, or regulated or contracted prices. The CPI is, along with the population census and the National Income and Product Accounts, one of the most closely watched national economic statistics.

* The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.


INFLATION:
A persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency (opposed to diflation).


DEFLATION:
A fall in the general price level or a contraction of credit and available money.

STAGFLATION:
An inflationary period accompanied by rising unemployment and lack of growth in consumer demand and business activity.

The CPI affects nearly all Americans because of the many ways it is used.

The CPI does not include investment items, such as stocks, bonds, real estate, and life insurance.

The CPI cannot be used as a measure of total change in living costs because changes in these costs are affected by (such as social and environmental changes and changes in income taxes) that are beyond the definitional scope of the index and so are excluded.

CPI cannot be used to measure differences in price levels or living costs between one place and another; it measures only time-to-time changes in each place.

The CPI may not be applicable to all population groups. For example, the CPI-U is designed to measure the experience with price change of the U.S. urban population and thus may not accurately reflect the experience of people living in rural areas


The CPI cover some good and services such as, food beverages, housing, apparel, tranportation, medical care,recreation, education and comunication, and other goods and servivices like,tobacco and smoking products, haircuts and other personal services, funeral expenses.