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Inaccuracies of the Consumer Price Index CPI

Date Submitted: 12/14/2004 14:48:34
Length: 2 pages (443 words)
Views: 190058

        The Consumer Price Index is a measure of the prices of a fixed market basket of some 300 consumer goods and services purchased by a 'typical' urban consumer. The 1982-1984 period serves as the base period so analysts can compare other year's changes with this base period. The composition of the market basket is fixed in the base period and is assumed not to change from one period to another. The reason for the assumption is …

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…hands to the Federal Government. However, indexing will tend to reduce the Federal Government's share by raising the levels of the tax brackets. Therefore, more money will stay in the people's hands due to indexing.         The only party that seems to be hurting as a result of the overcompensation of the CPI is the Federal Government. Because consumers are the ones that are being affected, they control the CPI as opposed to the Federal Government.

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