Thursday, July 20, 2006
How the Consumer Price Index is calculated
This is a very important story- how the Bureau of Labor Statistics actually, literally, creates the nation's market basket to create the CPI, the most important measure of inflation. Whenever i bring up the concept, sudents always ask, "what's in the basket?" This report answers this question.
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2 comments:
Although metropolitan areas are more dynamic in terms of economic activity, I don't see why the bureau can't make a third CPI measure that could use a broader or more stratified sample to include rural/suburban residents in addition to city people. The core CPI insulates against price volatility in food and energy sectors, while a broader CPI measure including rural economy would lie on the other end of the spectrum, putting the "regular" CPI in the middle. Even if a broader CPI calculation wouldn't be done as often, I think that perhaps it could still provide some added insight and leave less out of the "basket."
I think that it is pretty neat that we can figure out how much a dollar is worth when comparing differnt times. It seems that if you keep your money it will slowly lose value as the years go by, since the dollar dramatically loses value(unless you have it in a bank where you earn intrest). CPI seems like a very important number and it is pretty amazing that we can take everything into account to create it.
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