Consumption of Consumer Price Index

What is inflation?

• An increase in the value of money
• A general increase in the level of prices
• An increase in the size of money
• An increase in the amount of air within a balloon

What is the consumer price index?

• A list of items which people consider to be necessary
• A yearly survey of item prices undertaken by the CIA
• A monthly survey of retail prices undertaken by Statistics Canada
• A long list of prices of items taken every 10 years

How do you calculate the current year CPI value for an item?

• (Price Level in Current Year / Price Level in Base Year) x 100.0
• (Price Level in Current Year / Price Level in Base Year) x 1000.0
• (Price Level Last Year / Price Level in Base Year) x 100.0
• (Price Level in Current Year / Price Level Last Year) x 100.0

What is a factor which we discussed that will effect CPI values?

• Amount of children taking economics 12
• Weather
• Time 
• Changes in item preferences

How does the CPI update the "basket" of goods and services being surveyed?

• Through a survey of family expenditures
• Through a survey which inquires about family incomes
• Through a survey which asks families what they would like to buy
• Through asking families what goods they put inside their basket

What are the imperfections of the CPI?

• Has too many items on the index
• Takes too long to create
• Quality Bias, Commodity Substitution Bias, New-Goods Bias, Outlet-Substitution Bias, and not a cost of living index.
• Quality Bias, Commodity Substitution Bias, New-Goods Bias, Outlet-Substitution Bias, and Consumer Bias

Why is it incorrect to call the CPI a cost-of-living index?

• All people have different spending patterns
• It does not calculate cost of living
• "Cost" is not the correct term as "price" is
• Cost-of-living is already calculated by another index

What could you say about a CPI of Singapore at 130.4 compared to a CPI of Vancouver of 125.7?

• Vancouver is a more expensive city
• Inflation in Singapore has grown at a faster rate than Vancouver
• Inflation in Vancouver has grown at a faster rate than Singapore
• Vancouver isn't worth my money or time