Macroeconomics – Understand the Consumer Price Index (CPI), Inflation and Unemployment

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Macroeconomics is the subject analyzing the economic factors that effect nations and the relationship with other nation. In this article, we will discuss the consumer price index(CPI), inflation and unemployment that effect the economy of a nation.

1. Consumer price index (CPI)

The price level is impacted by a broad range of prices in the economy and is measured by a price index and changes in price levels are measured by changes in a price index over a period of time. The Consumer Price Index, or CPI measures the price of a basket of consumer good overtime a period of time. This basket of goods refers to those goods and services typically consumed by a nation family for necessities of life, such as food, shelter and clothing, consumer electronic and house hold items.

If the CPI increase faster than the family income, the living standard of household declines, and I have inflation. Each year the changes in CPI are measured against the base year and the base year is moving upwards occasionally in order to keep the numbers meaningful and relevant. Since 1980, the CPI has increased by approximately 6% per year.

2. Inflation

The inflation rates are shown as a percentage change in the price level and inflation is the increase in the general price in the economy from one period to another. As the inflation increase our purchase power decrease, our money is devalued because good now become more expensive resulting in lower living standard.The central bank in the all nations make momentary and financial change to offset the effects of inflation by lower or increase the central bank rate.

3. Unemployment rate.

The unemployment rate is calculated by dividing the total number of unemployed people by the number of persons available in the labor force. The labor force is the total number of people unemployed who are actively looking for work plus the total number of people employed. People working part time are not included in this calculation. The unemployment rate also fluctuates from one time period to another and varies from group to group.

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Source by Kyle J Norton