Macroeconomics CPI questions with correct answers

What is the Consumer Price Index and why is it significant? correct answer The consumer price index (CPI) is a measure of the overall cost of the goods and services bought by a typical consumer. CPI is used to find the inflation rate. The CPI affects nearly all Americans because of the many ways it is used. It is used as an economic indicator, as a deflator of other economic series, as a means of adjusting dollar values. How is the Consumer Price Index calculated? What is the formula? correct answer The CPI is calculated by dividing the price of basket of goods and services by the price of basket in base year, then multiple that by 100. To find the price of the basket of goods and services, you multiply the goods by their prices and add them up. For example, if you were buying 4 hot dogs and 2 hamburgers, and each hot dog cost $1 while each hamburger cost $2, it would be ($1per hot dog X 4 hot dogs) + ($2 per hamburger 2 hamburgers) = $8. So, ($8/$8) X100 = a CPI of 100