- What is the CPI and what is its purpose?
The CPI, or consumer price index, takes a look at a typical consumer, and the overall cost of goods and services they purchase. The CPI is calculated by the Bureau of Labor Statistics.
2.
2.
Year
|
Price of Footballs
|
Price of Basketballs
|
Year 1
|
$10
|
$12
|
Year 2
|
12
|
15
|
Year 3
|
14
|
18
|
Basket = 3 footballs, 4 basketballs
Cost of Basket
Cost in Year 1: (10*3)+(12*4)= $78 per basket
Cost in Year 2: (12*3)+(15*4)= $96 per basket
Cost in Year 3: (14*3)+(18*4)= $114 per basket
CPI
CPI in Year 1: ($78/$78)*100= 100
CPI in Year 2: ($96/$78)*100= 123
CPI in Year 3: ($114/$78)*100= 146
Inflation Rates
Inflation rate for Year 2: (123-100)/100= 0.23, or 23%
Inflation rate for Year 3: (146-123)/123= 0.187, or 19%
3. Take a look at the following link. Notice all the different measures of a country's "Standard of Living." Which do you think is the best measure and why?
Cost of Basket
Cost in Year 1: (10*3)+(12*4)= $78 per basket
Cost in Year 2: (12*3)+(15*4)= $96 per basket
Cost in Year 3: (14*3)+(18*4)= $114 per basket
CPI
CPI in Year 1: ($78/$78)*100= 100
CPI in Year 2: ($96/$78)*100= 123
CPI in Year 3: ($114/$78)*100= 146
Inflation Rates
Inflation rate for Year 2: (123-100)/100= 0.23, or 23%
Inflation rate for Year 3: (146-123)/123= 0.187, or 19%
3. Take a look at the following link. Notice all the different measures of a country's "Standard of Living." Which do you think is the best measure and why?
The quality-of-life index seems to be the best and most comprehensive measure of a country's "Standard of Living," as it takes multiple factors into account as opposed to the GDP only or homeownership only indexes. The quality-of-life index measures social, economic, and political variables such as GDP per capita, life expectancy, political stability, job security, and more.
Chloe,
ReplyDeleteI chose the same option for measuring a country's SOL. I also believe that quality-of-life index paints a better picture of how and why consumers will choose to spend the way they do.