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Author Question: What are the three stages of constructing the CPI? What will be an ideal ... (Read 73 times)

nevelica

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on: Jun 29, 2018
What are the three stages of constructing the CPI?
 
  What will be an ideal response?

Question 2

Retirement savings accounts, such as IRAs, help increase economic growth because
 
  A) they encourage international trade.
  B) government invests them.
  C) they keep the interest rates high.
  D) people have an incentive to work harder and longer hours to save for the future.
  E) savings finances investment.


wuly

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The first stage is to select the CPI market basket. The market basket is determined by surveying the spending habits of consumers by conducting a Consumer Expenditure Survey. The second stage is to check the prices of about 80,000 goods and services in 30 metropolitan areas. This checking is done on a monthly basis. The third stage is to calculate the CPI itself. To calculate the CPI, a period of time is selected as the base reference period and the cost of the CPI market basket using the prices from that period is computed. Then the CPI in any other month equals 100 times the quotient of the cost of the market basket using current-period prices divided by the cost of the market basket in the reference base period.

Answer to Question 2

E


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