Exam 11: Measuring the Cost of Living: Part B

One advantage of using the CPI over the GDP Deflator is that the CPI updates the basket of goods used to compute the index each month whereas the GDP Deflator maintains the same basket of goods for long periods of time.

If the CPI today is 120 and the CPI five years ago was 80,then something that cost $1 five years ago would cost $1.50 in today's prices.

When the consumer price index is computed,the base year is always the first year among the years being considered.