Question

Why does the Cost of living index have a lower value than the CPI when measuring price rises? Thank you for answering my question

Answer 1

The Consumer Price Index, or CPI is a measure of inflation calculated by US government statisticians based on the price level from a fixed basket of goods and services that represents the purchases of the average consumer.

CPI tends to overstate inflation because there are several biases that might influence:

For example when the price of a product increases substantially, consumers tend to substitute lower-priced alternatives. Over time, technological advances increase the life and usefulness of products, but the CPI does not reflect such improvements. New products are not introduced into the index until they become commonplace, so the dramatic price decreases often associated with new technology products are not reflected in the index.