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what is consumer price index

what is consumer price index

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Answer #1

This is famously called as CPI and calculated for measuring the change in price of a market basket of having various goods. This is useful for understanding the inflation rate.

A basket should be chosen first and then it should be multiplied by current prices in order to get “GDP of current period”; again, that basket should be multiplied by base year prices in order to get “GDP of base year”. Then the following formula should be used in order to get CPI.

CPI of current period = (GDP of current period / GDP of base period) × 100

CPI of base period always would be 100.

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