Sep 27 2012
Special thanks to Tim Schilling at MV=PQ blog for pointing out the Cleveland Fed’s interesting video series called the “Drawing Board”.
This video introduces the concept of Consumer Price Index as a measure of inflation in the United States, shows how CPI is calculated, and then goes into a bit more detail than perhaps the AP or IB student needs when it introduces a new method of measuring inflation used by the Fed called “median inflation”.
AP and IB students can benefit most from watching up to 4:12. In this first half of the video the CPI is defined, its measurement demonstrated, short-comings discussed and the “core CPI” explained.
- Why does the Bureau of Labor Statistics weight different items included in the measure of the consumer price index? What type of good gets a greater weights than others?
- What are some of the purposes the CPI figure serves? Why do we care about changes in the price level in an economy?
- What is one short-coming of the traditional method used for measuring the inflation rate using CPI?
- Why did the BLS decide exclude oil and food prices from its “core CPI” figure?
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