Eco/561 Inflation And Analyses Of Monetary Policies

Inflation and Analyses of Monetary PoliciesNameECO/561DateThe consumer price index is a measure of changes in the price levels of consumer goods and services purchased by households. Changes in consumer prices from one period to another reflect inflation for the given period. Since it may not be possible to measure every item consumed in households a sample of goods and services is used to represent consumption expenditure in an economy. US CPI IndexIn the United States, the consumer price index (CPI) basket contains 175 components. In the calculation of the consumer price index, the year over year rate of inflation of each component is multiplied by its relative weighting in the index. Weighting is used to reflect the relative importance of goods and services in the expenditure basket in terms of each items share of expenditure in the total consumption of households. For ease of comparison, weighting is consistent from one period to the other.In the US consumer price index calculation is a rigorous exercise that involves the categorization of consumption into categories and subcategories both in terms of geographical regions and in terms of consumer basis such as