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Calculation of the Consumer Price Index (CPI)

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

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Solution Summary

Strengths and weaknesses of the CPI are considered in this solution.

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The strengths of the CPI are its ease of calculation and the depth of information presented. Rather than a single value, the CPI can be broken down into regional inflation or the type of goods purchased.

However, the CPI has some weaknesses. The CPI tends to be volatile over short periods of time, which is its primary weakness. It can also vary depending on ...

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