The Consumer Price Index is a valuable tool for measuring inflation over time. The CPI is measured using urban consumers who spend their money on a "market basket of goods" that include food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other services. The change in CPI is based on current and base year prices
CPI: Inflation Picks Up
According to the BLS, the CPI rose 3.8% in August of this year compared to a year earlier. Food prices rose 4.6% and clothing prices were up 4.2%, while new car prices rose 3.8%, and medical care was up 3.2%.
a.What percentage change in the CPI up until August is accounted for by the changes in the prices of food, clothing, and medical care?
b.Given the changes in food, clothing, and medical care, by what percentage did the prices of the other items in the CPI basket change?
i.Why did the prices of the other items change?
ii.What is the probable impact of the change of other items in the CPI basket?
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