•Find inflation (CPI) figures and graphs for the period 2005 –2015 for the following countries: •Denmark
•Analyze how the inflation has developed in the countries in the time period.
•Assess whether the inflation has been at a satisfactory level in each of the three countries.
•Explain and assess how the inflation can go towards a more satisfactory level in the three countries. (What can cause the inflation to go towards a better level)?
•Explain how people’s purchasing power drops if the inflation is too high.
•Explain what deflation is and explain why this is negative for the economy.
•What is CPI and how do we measure inflation? Give examples of things that is included in the British CPI.
What is CPI and how is inflation measured?
The Consumer Price Index is a way to measure to find the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
This is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.
Changes in the CPI are used to assess price changes associated with the cost of living.
The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. CPI measures the average change in prices over time that consumers pay for a basket of goods and services, commonly known as inflation.
Essentially it attempts to quantify the aggregate price level in an economy and thus measure the purchasing power of a country's unit of currency.
The average that is weighted over the prices of the goods and services that approximates an individual's consumption patterns is used to calculate CPI.
Inflation is an increase in the level of prices of the goods and services that households buy. It is measured as the rate of change of those prices. Typically, prices rise over time, but prices can also fall which is deflation.
Most times to calculate the CPI they are grouped into 87 categories and 11 groups.
And then every quarter, it is going to be calculated to see the price change of each item from the previous quarter and this helps them to work out the inflation rate for the entire CPI basket. Examples of things included in the British CPI
When looking at the British CPI, they collect differences prices in 150 areas in the UK. Some of the things that they are collected information Is about is alcohol and tobacco, transport, restaurants and hotels. This is just some of the things that they collect the prices from to get a indication of how the CPI is developing over time.