Measuring the
Cost of Living
Measuring the Cost of
Living
Inflation refers to a situation in
which the economy’s overall price
level is rising.(通货膨胀指经济的总体物价水平上涨 )
The inflation rate is the percentage
change in the price level from the
previous period.
The Consumer Price Index
消费价格指数
The consumer price index (CPI) is
a measure of the overall cost of the
goods and services bought by a
typical consumer.
消费价格指数 (CPI) 衡量一个典型的消费者所购买的物品和劳务的全部成本,
The Consumer Price Index(CPI)
When the CPI rises,the typical
family has to spend more dollars
to maintain the same standard of
living.
当 CPI提高时,家庭必须要花更多的钱
How the CPI is Calculated
1.Fix the Basket(固定篮子 ):
Determine what prices are most
important to the typical
consumer.
确定对消费者来说,什么产品的价格是重要的
Housing
Food/Beverages
Transportation
Medical Care
Apparel
Recreation
Other
Education andcommunication
What’s in the CPI’s Basket?
40%
16%
17%
6%
5%
6% 5% 5%
How the CPI Calculated
2.Find the Prices,Find the prices of
each of the goods and services in
the basket for each point in time.
找出篮子里每一种物品和劳务的价格
How the Consumer Price Index
Is Calculated
3.Compute the Basket’s Cost,Use
the data on prices to calculate the
cost of the basket of goods and
services at different times.
使用价格的数据计算篮子里所有物品和劳务的成本
How the Consumer Price
Index Is Calculated
4.Choose a Base Year and Compute the
Index(选择基年,计算价格指数 ),
Designate one year as the base year
Compute the index by dividing the
price of the basket in one year by
the price in the base year and
multiplying by 100,
How the Consumer Price Index
Is Calculated
5.Compute the inflation rate(计算通货膨胀率 ),The inflation rate is the
percentage change in the price
index from the preceding period.
The Inflation Rate
1 0 01 Ye a r in CP I 1 Ye a r in CP I - 2 Ye a r in CP I Ye a r 2in R a t e I n fl a t i o n
The inflation rate is calculated as
follows:
Calculating the Consumer Price Index
and the Inflation Rate,An Example(计算
CPI和通胀率 )
Step 1:Survey Consumers to Determine a
Fixed Basket of Goods
4 h o t d o g s,2 h a m b u r g e r s
Calculating the Consumer Price Index and
the Inflation Rate,An Example
Y e a r
P r i c e o f
H o t do gs
P r i c e o f
H a m b u r ge r s
2 0 0 1 $1 $2
2 0 0 2 $2 $3
2 0 0 3 $3 $4
Step 2,Find the Price of Each Good in
Each Year
Calculating the Consumer Price Index
and the Inflation Rate,An Example
Step 3,Compute the Cost of the Basket of
Goods in Each Year
Calculating the Consumer Price Index and
the Inflation Rate,An Example
Step 4,Choose One Year as the Base Year (2001)
and Compute the Consumer Price Index in Each
Year
2 0 0 1 ( $ 8 / $ 8 ) x 1 0 0 = 100
2 0 0 2 ( $ 1 4 / $ 8 ) x 1 0 0 = 175
2 0 0 3 ( $ 2 0 / $ 8 ) x 1 0 0 = 250
Calculating the Consumer Price Index and
the Inflation Rate,An Example
2 0 0 2 ( 1 7 5 - 1 0 0 ) / 1 0 0 x 1 0 0 = 75%
2 0 0 3 ( 2 5 0 - 1 7 5 ) 1 7 5 x 1 0 0 = 43 %
Step 5,Use the Consumer Price Index to
Compute the Inflation Rate from Previous Year
Calculating the Consumer Price Index and the
Inflation Rate,Another Example
Base Year is 1998.
Basket of goods in 1998 costs $1,200.
The same basket in 2000 costs $1,236.
CPI = ($1,236/$1,200) X 100 = 103.
Prices increased 3 percent between 1998
and 2000.
GDP Deflator (GDP平减指数 )
100
G D P Re al
G D P N o m i n al=de f l at o r G D P?
The GDP deflator is calculated as follows:
Two Measures of Inflation
1965
Percent
per Year
15
10
5
0 1970 1975 1980 1985 1990 1995 2000
CPI
GDP deflator