How The CPI Is Used

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Consumer Price Index (CPI)

The price stability is one of the
nation’s important
macroeconomic goals

Indexing a payment makes up for
any loss of purchasing power caused
by inflation.

 In order to compare economic values from
different periods, we must translate nominal
variables into real variables.

CPI Nominal
Wage
Real
Wage
2010 100 15 15
2015 200 30 15

CPI Nominal
Wage
Real
Wage
2010 100 15 15
2015 200 15 7.5

The end! 

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How The CPI Is Used

1.

2. The price stability is one of the nation’s important macroeconomic goals

3. Indexing a payment makes up for any loss of purchasing power caused by inflation.

4.  In order to compare economic values from different periods, we must translate nominal variables into real variables.

5.

6. CPI Nominal Wage Real Wage 2010 100 15 15 2015 200 30 15

7.

8. CPI Nominal Wage Real Wage 2010 100 15 15 2015 200 15 7.5

9.

10. The end! 