4. Write a short paragraph that answers these questions to analyze changes in the inflation rate: (a) How has the CPI for all items changed over the past 12 months?
(b) What does the current CPI indicate about the health of the U. S. economy?
(c) Does your research support the theory that there is a tradeoff between unemployment and inflation?

What is the CPI?

The Consumer Price Index (CPI) is a measure of the average change overtime in the prices paid by urban consumers for a market basket of consumer goods and services.The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought. There is a time lag between the expenditure survey and its use in the CPI. For example, CPI data in 2016 and 2017 was based on data collected from the Consumer Expenditure Surveys for 2013 and 2014. In each of those years, about 24,000consumers from around the country provided information each quarter on their spending habits in the interview survey. To collect information on frequently purchased items, such as food and personal care products, another 12,000consumers in each of these years kept diaries listing everything they bought during a 2-week period.

Over the 2 year period, then, expenditure information came from approximately24,000 weekly diaries and 48,000 quarterly interviews used to determine the importance, or weight, of the item categories in the CPI index structure.