Consumer price index
The consumer price index (CPI) is a measure of changes in prices. "The CPI measures changes in the prices of goods and services bought by households."[1] It is used to measure inflation, which is a general rise in prices.
Index numbers
The CPI is an index number. "An index number measures the change in magnitude, in this case the price level, compared to another period."[1] The value in the starting year, called the base year, is set at 100.[1] If the index later reads 110, prices have risen by 10 per cent since the base year.
How it is worked out
The CPI is calculated as a weighted average of the prices of the goods and services it tracks.[2] This means that things households spend more on count for more in the index.
Use
The European Central Bank interprets stable prices as yearly consumer price inflation of below but close to 2 per cent.[3]
See also
References
- ↑ 1.0 1.1 1.2 Dullien, Sebastian; Goodwin, Neva; Harris, Jonathan M.; Nelson, Julie A.; Roach, Brian; Torras, Mariano (2018). Macroeconomics in Context: A European Perspective. Routledge. p. 175. ISBN 9781138185180.
- ↑ Dullien, Sebastian; Goodwin, Neva; Harris, Jonathan M.; Nelson, Julie A.; Roach, Brian; Torras, Mariano (2018). Macroeconomics in Context: A European Perspective. Routledge. p. 176. ISBN 9781138185180.
- ↑ Dullien, Sebastian; Goodwin, Neva; Harris, Jonathan M.; Nelson, Julie A.; Roach, Brian; Torras, Mariano (2018). Macroeconomics in Context: A European Perspective. Routledge. p. 382. ISBN 9781138185180.