May 09 2008

Exactly what does inflation measure?

Published by Jason Welker at 8:50 am under

All of Inflation’s Little Parts – The New York Times

This is really cool… The Bureau of Labor Statistics releases monthly data on prices to let Americans know just how much inflation affects their livelihoods. The Consumer Price Index, which is studied in both AP and IB Economics, consists of a “basket of goods”, that when bundled together represent the “typical” American consumer’s expenditures. The CPI is broken into a few broad categories:

  • Health care
  • Apparel
  • Housing
  • Education/communication
  • Recreation
  • Food/beverages
  • Transportation
  • Miscellaneous

Here’s the cool part, though… within each broad category the BLS tracks the prices of dozens of specific categories, around 200 to be precise. Each of these is then broken down into individual products, around 84,000 in total! The task of tracking the prices of 84,000 individual goods and services every month is daunting, and just thinking about the tedium of this job makes me glad I’m a teacher!

The New York Times has assembled what can only be described as a mosaic of consumption, organizing the 200 specific CPI categories into what looks like an ornate stained-glass window, in which the size of each piece of glass represents the percentage of Americans’ income that go towards each specific category. Some of the categories represented in this mosaic include items such as:

  • Oils and peanut butter (0.1%)
  • Gasoline (5.2%)
  • Garbage collection (0.3%)
  • Internet (0.3%)
  • Nursing homes (0.1%)
  • New cars and trucks (4.6%)
  • DVDs (0.2%)

This graphic is a great tool for teaching and understanding the Consumer Price Index, not to mention a beautiful pattern for any stained-glass artist looking for inspiration!
nyt-cpi-graphic

About the author: Jason Welker is a teacher at Zurich International School in Switzerland, where he teaches Advanced Placement and International Baccalaureate Economics. Jason was an international school student in Malaysia before studying economics at Seattle University then earning his Masters in Education. He calls Seattle and Northern Idaho home. In addition to maintaining an economics wiki and this blog for economics student and educators, Jason also gives presentations on using Web 2.0 tools in education at workshops and conferences around the world. His economics wiki won the 2007 "Best Educational Wiki" award from the "EduBlog Awards".

Related posts:

  1. Enter the age of inflation…
  2. Unemployment and inflation: understanding the Fed’s balancing act
  3. Inflation: a threat to fear now or a distant concern?
  4. Inflation in the headlines!
  5. In the meantime, retaliatory regulations contribute to China’s inflation!

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