INFLation And The Cpi

The cost of steel has risen dramatically, which is making it more expensive to produce automobiles and appliances. Not surprising, GM and GE are just two manufacturers that are passing their increased production costs onto the consumers in the form of higher prices. This is an an example of ___________. 

• Deflation

• Cost-push inflation

• Demand-pull inflation

• Market forces

An example of ____________ occurs when the purchasing power of money falls so low that consumers begin to buy gold, diamonds and even tulips.

• Destabilization

• Hyperinflation

• Deflation

• Consumer unrest

Which is not associated with hyperinflation?

• War or its aftermath

• Rising output in the economy

• The hoarding of goods and speculation

• A halt to the use of money as both a medium of exchange and a standard of value

Interest rates are lower than the rate of inflation. Discuss how these differences in rate will affect consumer saving and spending.

BACKGROUND: The CPI Consumer Price Index represents more than 200 categories of goods and services purchased for consumption. Following are eight major groupings of these categories and representative examples within these categories: ·       FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks) ·       HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture) ·       APPAREL (men's shirts and sweaters, women's dresses, jewelry) ·       TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance) ·       MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services) ·       RECREATION (televisions, toys, pets and pet products, sports equipment, admissions); ·       EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories); ·       OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).   Answer in the RAVE format Restate the question in the form of a topic sentence Answer all parts completely Vocabulary -- use relevant terms Examples -- include them QUESTION:   Is the rise and fall of the CPI an accurate measure of inflation?  In your analysis consider whether price increases associated with product enhancements and innovation could impact this index. (e.g.: The price of iPads may go up, but one could argue that the improved features and functions support the price hike.)