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The '''Consumer Price Index''' (CPI) is the government's gauge of [[inflation]]. It is used, for example, to adjust [[tax brackets]] and social security payments for inflation. To find it, the [[Bureau of Labor Statistics]] checks the prices of items in a fixed representative ''market basket'' of hundreds of goods and services used by typical consumer in a base year and compares the changes that occurred in that basket over time. The CPI is calculated as:
The '''Consumer Price Index''' (CPI) is a popular gauge of [[inflation]]. It is used, for example, to adjust [[tax brackets]] and social security payments for inflation. To find it, the [[Bureau of Labor Statistics]] checks the prices of items in a fixed representative ''market basket'' of hundreds of goods and services used by typical consumer in a base year and compares the changes that occurred in that basket over time.
Technically it is not as valuable in understanding inflation as the "implicit price deflator" of GDP, which includes prices for non-consumer goods (like highways and factories).
==Trends==
[[File:Cpi.jpg|Thumb|400px|CPI change from previous year]]
==calculation==
The CPI is calculated as:
<math>CPI= \frac {\sum (Base~year~quantity \times Current~year~price)~for~each~item}{\sum (Base~year~quantity \times Base~year~price)~for~each~item} \times 100</math>
<math>CPI= \frac {\sum (Base~year~quantity \times Current~year~price)~for~each~item}{\sum (Base~year~quantity \times Base~year~price)~for~each~item} \times 100</math>