What Is Consumer Price Index (CPI)?

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It 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. It may be compared with the producer price index (PPI), which instead of considering prices paid by consumers looks at what businesses pay for inputs.

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