Chapter 24

Chapter 24 transitions from gross domestic product to consumer price index, also known as CPI. Consumer price index is the measure of the prices that the average consumer in a country spends on services and goods. In order to calculate consumer price index, one must know the fixed goods that the average consumer purchases within a certain time frame. After accounting for inflation, the price of the good is calculated. The bureau of labor statistics calculates it with a rather similar procedure to that of the gross domestic product deflator. This is because that both gross domestic product and consumer price index are calculated based on previous years. However, they calculate the difference differently than one another. Similar to gross domestic product, the consumer price index is not one hundred percent accurate. People who are better off will throw off this average, while people who are not well off will do the same. This can alter the appearance of how wealth is spread throughout the country's society.  The consumer price index also does not take account of new goods, changes in tastes, and changes in prices that could change the quantity demanded of the goods.  The chapter also discussed the change in price index of a country. Although, the consumer price index does not account for inflation or slight changes that are ignored.