What is CPI?
CPI stands for Consumer Price Index. It is the measurement of range of consumer products. It is calculated in urban areas and provides a fairly good look at how much inflation has occurred in the country. This type of index is widely used and similar in most ways to a cost of living index.
This is the change in the price "shopping basket" of consumer goods for a country that the national statistics agency has sampled over time on a monthly basis. The "core CPI" is the change in prices without the food and energy components, or "ex food and energy". Since food and energy prices are volatile, the "core CPI" is thought to be a more accurate measure of underlying inflation.
Changing buying patterns can impact the CPI. All factors considered, the CPI in most modern industrial countries is thought to be a fairly accurate reflection of the change in the retail price level. This is important since CPI is used to index government pensions and benefits, as well as tax brackets. The CPI is also used to convert the nominal national accounting statistics, such as "Gross National Product" to a "real" or after-inflation basis.
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