CPI
The Consumer Price Index (CPI) measures inflation by tracking price changes in a basket of goods and services purchased by typical consumers. It is the main inflation measure used by governments and central banks. CPI inflation is calculated as the annual percentage change.
Real World
In 2024, the ONS added air fryers and vinyl records to the UK CPI basket while removing roasted peanuts, reflecting how British consumer spending habits shift over time.
Exam Focus
Evaluate CPI by discussing limitations: substitution bias, quality changes, and exclusion of housing costs covered by CPIH instead.
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