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Consumer Price Index

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The Bureau of Labor Statistics follows five steps to calculate Consumer Price Index. What are three strengths and three weaknesses of the Consumer Price Index calculation.

? What are the characteristics of the strengths?
? What are the characteristics of the weaknesses?
? If the CPI is imperfect, why do we use it?

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CONSUMER PRICE INDEX
CHARACTERISTICS OF STRENGHTS:
1. It provides a measure of inflation:
2. It can be used to track changes in prices of goods and services purchased by households;
3. It provides a cost of living model which reduces the reported level of inflation.

CHARACTERISTICS OF WEAKNESSES:
1. The index is scaled so that it is 100 at a chosen period of time. The selection of this period of time is arbitrary.
2. There are ...

Solution Summary

This solution talks about Labor Statistic Calculation of the Consumer Price Index. It explores the strengths and weaknesses of the Consumer Price Index calculation.

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