January CPI Inflation Rate Slows

Ahead of January’s CPI release, the Bureau of Labor Statistics published new weights for certain categories, a process it undergoes every two years. Moving forward, it will update the weights every year. With the new changes, housing accounts for 44.4% of the index, up from 42.4%, and the food weight fell to 13.5% from 13.9%.—usatoday.com

Answer the following questions to check your understanding of the story.

What does the increased weight for housing in the CPI basket tell us?

The increased weight for housing in the CPI basket tells us that compared to two years ago, _______________.

a) all households are spending a larger percentage of their budget on housing

b) the price of housing is rising for all households

c) the average urban household is spending a larger percentage of their budget on housing

d) the price of housing is rising for the average urban household

Why would the BLS want to update the CPI basket annually?

Annual updates to the CPI basket _____________.

a) increase Social Security checks, wage rates, and rents

b) keep the inflation rate lower than it would be otherwise

c) eliminate the new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias

d) make government payments that are adjusted by the CPI more accurate

January CPI Inflation Rate Slows

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