Measurement of Inflation

In order to receive full credit for this discussion, you need to post an answer of at least 100 words
to two of the three main questions below. Explain why. The goal is to motivate careful consideration
and discussion of the measurement of inflation.
(1) Which is a more meaningful measure of “inflation” – the one using the headline CPI-U (including
energy and food prices) or the one using “core” CPI-U (excluding energy and food prices)? Why?
From which perspective?
(2) Try the CPI Inflation Calculator: http://www.bls.gov/data/inflation_calculator.htm (Links to an
external site.) to determine the historical price of something you might buy today. (Type a dollar
amount in any year at the top. Select the year at the bottom to determine how much the top
amount was worth in the bottom year.) Remember, prices of all expenditure categories have not
changed at the same rate. Any calculation you make with the calculator is based on the changes in
the “CPI-U for all Items.”
(3) Take a look at the details of the most recent Consumer Price Index news release:
http://www.bls.gov/news.release/cpi.htm (Links to an external site.)
Do you see any specific product groups that went up or down in price more or less than the
average? Can you suggest any factors that may have affected those product prices?

Sample Solution

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