Consumer Price Index

And now class, let's swith gears and discuss a different topic? Consumer Price Index,
CPI for short. If you switched on the TV and heard on the news that the CPI in
Canada was 2.1%, what does that mean? In a nutshell, it means that Canadian
consumers paid 2.1% more than in the previous year for the goods and services
included in the CPI basket. Although prices of goods and services rise and fall over
time, when prices change too dramatically, they can have negative effects on an
economy. In order to tell if an economy is experiencing inflation, deflation or
stagflation, we use the CPI as a gauge of the price of goods and services. Believe it or
not, when the Department of Labor's Bureau of Labor Statistic releases the CPI date
monthy, you might ask? Well, the CPI play a role for many key financial decision
makers, including individual investors, the Bank of Canada in Canada and the
Federal Reserve in the U.S. The CPI helps the Bank of Canada forecast the interest
rate policy and other decisions of major banks and corporations. I mentioned the CPI
basket before and now I want to expand on what this basket is and how wer get the
information. The base-year market basket, which makes up the CPI, comes from
detailed expenditure information collected from surveys of thousands of families.The
information is not randomly collected, instead, the information is gathered through
interviews and diaries kept by participants who have agreed to disclose their buying
havits. The basket is divided into eight groups: food and beverages, housing, apparel,
transportation, medical care, recreation, education and communication, and other
goods and services, and inclues more than 200 categories. Finally, the prices of 80
000 items in the market basket are collected nonthly from thousands of retail stores,
wervice establishments, rental units, and doctors' offices.

What is the lecture mainly about? (Click on 2 answers)
A How to forecast interest-rate out of the Consumer Price Index.
B The disadvantages of the Consumer Price Index.
C The function of the Consumer Price Index.
D How to measure the Consumer Price Index.

(C,D)