What is the real CPI?

Inflation is an economic phenomenon that increases the costs of goods that the individual must live and maintain a certain standard of living. Inflation is classically defined too much dollars that chase too little goods, monitor every quarter using the consumer price index (CPI). The main problem of CPI calculations is that they do not actually take into account the real CPI. The actual CPI is a real change in the price for goods and consumers' purchases, not a fictitious basket of economists of goods that they will draw together for the calculation of CPI. Individuals can calculate the actual figure of CPI by distributing the current price by a basic year and multiplying 100 to obtain a real inflation number. In a particular year, the middle price was $ 150,000 in the US (USD) for a certain type of house in a particular region. Medium housing prices for the same type and region were $ 168,000 five years later. The CPI calculation divides 168,000 by 150,000 and multiplies by 100, which gives an answer 12 percent. The actual inflation of housing in this period is therefore 12 percent, compared to the reported CPIfrom economists using their formula.

In most cases, the reported data of CPI from economists or national governments on stable free markets are often below 10 percent. However, as the above example states, this cannot be true if housing prices have increased by 12 percent. The real CPI attempts to remove distortion and defective computer techniques for CPI from standard inflation formulas. For example, economists can add weights to different categories of their inflation patterns. This may distort the result of the real CPI, as stated by the actual, non -adulterated data calculated on the basis of the actual items of the items.

Further use of real CPI is measuring price changes for substitute goods or the most commonly purchased CONSEMMERS. Standard CPI calculations take standard baskets of goods, although consumers may not buy these items. Substantial goods are items that consumers buy when revenue decreasesor purchasing power. The demand for these goods should make a special interest for economists who calculate inflation. If these goods are not included in standard CPI calculations, then Real CPI is not measured correctly.

Real CPI is not an index of life costs or adjustment (Cola). However, the way economists have assembled their inflation patterns is to function as Cola. This is one of the greatest reasons why consumers do not have information about the actual inflation numbers.