Chapter 24

I would give this chapter a two out of three for difficulty because while it was simple to see some of the uses and shortcomings of the consumer price index, I will need practice with the calculation portion of it. I also can see the difference between the GDP deflator and the CPI. The CPI measures everything that consumers spend their money on while the GDP deflator measures the prices of good produced domestically. That's why in the case of the consumer the CPI is going to be a better general measure of the costs for different standards of living. Other than looking at the cost of living now we can use the CPI to compare it to the costs of living in previous years by accounting for inflation. CPI is very important to try and calculate correctly when using indexation.