Welcome to Professor Savings.com
We teach finance basics.
Hi, I’m your host today Rayfil Wong.
Topic today, what is consumer price index or CPI for finance street creed.
Basically consumer price index measures changes in the price level of a market basket of consumer goods and services purchased by households.
This is defined by Bureau of Labor Statistics
Let’s jump to an example.
Take a basket of goods from 2013 toothpaste, eggs, butter, milk ext all the goods are added up and compared to the current 2014 basket of goods annual percentage change in CPI used as a measure of inflation.
CPI used to index real value of pensions and salaries so this is why you care you can be aware of certain rise in prices of goods so you know how much to plan ahead.
Basically, you will be paying more for less when inflation rises.
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