Consumer Price Index is used to measure inflation rates and there is controversy over which method to use. CPI was originally found by comparing the price of a fixed basket of consumer goods over two different time spans but now experts are saying that this basket should reflect the the changes in cost in order to calculate for the cost of living. This new method is more accurate because it gives a better understanding of how our everyday costs fluctuate throughout the year. Both methods of finding the CPI will produce a different outcome so it is important to know which method is being used to better understand the data that is given. This is good information for potential investors to know so that they can create a plan and see if the payout would be worth it. Since the consumer price index is such a big part of finding GDP, it is important to make sure that the CPI is accurate so that the GDP can be better interpreted by analysts.
https://www.investopedia.com/articles/07/consumerpriceindex.asp
i do agree with the article that cpi is pretty important to investors or firms because it show how much your product fluctuates with consumers and show the same thing for investors
ReplyDeleteMeasures like real output, real wages and poverty are calculated using inflation adjustments that don’t reflect the higher cost of living during a pandemic. When price changes aren't reflected well in the economy it makes it hard for citizens to make informed decisions about the economy. It is important for people to be aware that these measurements aren’t truly reflective of the increased expenses like in previous economic troubles. A new method to reflect these changes would be nice as long as people are aware of the differences between them.
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