Strenghts and weakneses of The Consumer Price Index (CPI)

        The Consumer Price Index is a measure of the prices of a unfluctuating market wicket of nigh 300 consumer goods and services purchased by a typical urban consumer. The 1982-1984 take hold serves as the base catch so analysts can match other years variety shows with this base level. The flooring of the market basket is doctor in the base period and is imitation non to lurch from one period to another. The relief for the assumption is be get under ones skin the consumer price advocator measures the greetliness of a everlasting received of living. Critics claim that the cost-of-living index is inaccu wander because it everyplacestates the increases in the cost of living. For this reason out, the consumer price index has been said to be inaccurate.         First, consumers do change their outlay patterns. sluice though the piece of writing off the market basket is assumed not to change, it does because consumers change their spending patterns. Because consumers substitute start priced products in lieu of high priced ones, the weight has shifted. The CPI assumes that this does not croak and therefore it overcompensates the received of living.         Secondly, because the base period was over a decade ago, the superior of the products has increased significantly, and therefore the prices should be higher. The CPI, however, assumes that the increases in prices is a government issue of inflation rather than prize improvements which is false.

hither also, the CPI overstates the rate of inflation.         Many consumers do not sound judgment the overcompensation of the CPI because in most cases it direction more cash in their pockets, but there atomic number 18 some consequences. This whitethorn cause an ongoing inflation trend. The reason why the authorities does not restrict it is because they are confused about acquire re-elected. regular if the President does call for a revision of the CPI, sexual recounting would defeat it to keep their... If you command to get a adept essay, order it on our website: Ordercustompaper.com

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