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Consumer Price Index - All Urban Consumers

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This problem uses Consumer Price Index (CPI) data from the U.S. Bureau of Labor Statistics (BLS) from 1913 to 2015. Note the years may be hidden, scroll to go all the way back to 1913.

a.) Use the annual CPI values to convert the given cost of an iPhone 6s in 2015$ into every other years' dollars. Assuming the iPhone 6s existed back then of course. How did people communicate without cell phones?

b.) Take the ratio of each year's annual CPI to the previous value and scale the second quantity to 1 by simply dividing the two values. Note: parts c-e below!

c.) Compute the annual inflation rate by subtracting 1 from the ratio from part c. Format as percentage to 2 decimal places.

d.) In what year did inflation increase the most? Note there is a way to get Excel to do this for you. First find MAX annual inflation rate. Then use MATCH to find which value this is in the column for inflation rates: 1,2,3,... Then you can use INDEX to pull the year from this row, or just find it yourself!

e.) Does inflation always increase from year to year? Answer should be yes or no.

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The Excel solution file contains all of the required formulas and solutions for the Consumer Price Index example.

Solution provided by:
J Pye, MSc
Education
  • MSc, California State Polytechnic University, Pomona
  • MBA, University of California, Riverside
  • BSc, California State Polytechnic University, Pomona
  • BSc, California State Polytechnic University, Pomona
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