Consumer Price Index Concepts

This video tutorial explains how to calculate the Consumer Price Index (CPI) and the inflation rate. It begins with definitions and the importance of CPI in measuring inflation. The tutorial provides a formula for calculating the annual inflation rate and demonstrates it using a simple economy example with three goods. The process involves calculating the cost of a fixed basket of goods over different years and constructing the CPI index. Finally, the video shows how to calculate the annual inflation rates for 2017 and 2018 using the CPI values.

What is the main focus of the video?

• How to calculate GDP

• How to calculate the Consumer Price Index and inflation rate

• How to measure unemployment

• How to analyze stock markets

What does CPI-U stand for?

• Consumer Price Index for Urban areas

• Consumer Price Index for Rural areas

• Consumer Price Index for All areas

• Consumer Price Index for Suburban areas

What is the purpose of the Consumer Price Index?

• To measure the cost of living in rural areas

• To calculate the average income of a country

• To measure the overall cost of goods in urban areas

• To determine the unemployment rate

How is the annual inflation rate calculated?

• By multiplying the CPI of the current year by 100

• By adding the CPI of two consecutive years

• By subtracting the CPI of the previous year from the current year and dividing by the previous year's CPI

• By dividing the GDP of two consecutive years

In the simple economy example, which goods are considered?

• Books, pens, and notebooks

• Soccer balls, shoes, and concert tickets

• Cars, bikes, and buses

• Laptops, phones, and tablets

Why is quantity data only needed for the base year?

• Because prices do not change

• Because the base year quantity is used to calculate the fixed basket cost

• Because quantity data is irrelevant

• Because it simplifies the calculation

What is the CPI in the base year always set to?

• 200

• 100

• 50

• 150

What was the CPI for 2017?

• 124.8

• 100

• 150

• 113.2

What was the inflation rate for 2017?

• 10.2%

• 13.2%

• 15.5%

• 20%

What was the inflation rate for 2018?

• 12.5%

• 15%

• 10.25%

• 20.5%