Why cpi calculated in urban areas only
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Explanation:
It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living; the CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.
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The Consumer Price Index for all urban customers recognizes only the prices paid by those living in urban areas for goods and services and even CPI calculated in rural areas also.
Explanation:
- Increasing CPI-U statistics suggest that the costs of goods/services within the urban population are becoming more costly and this could be an indication of rising inflation.
- When contrasting the CPI for urban areas and rural areas, we found that the consumer price index for urban areas is comparatively better reflective of ordinary people because most consumers live in urban areas.
- Around 90 percent of the total population are residing in urban areas. CPI is also used to measure inflation, and also measures the fiscal and monetary policy efficacy of government.
Learn more about CPI
Mention the idelogy of CPI
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List two items from the CPI basket which are excluded when measuring core inflation
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