Glamor Economics

Chapter 150

Chapter 19 Section 5 The price index that affects the hearts of the people——CPI
Since 2008, there has been a saying circulating everywhere on the Internet: "The Drifting Monk said to Sun Wukong: 'Senior brother, now the meat of the second brother is worth more than the meat of the master!'"

Since May 2007, pork has risen by 5% within half a year, and the most expensive price reached 55.8 yuan per catty, which everyone did not expect.

A retired worker said: "My monthly income is less than 2000 yuan. To put it bluntly, I can't even buy half a pig. I hardly even eat pork now. I only buy some stuffing occasionally. When will the price of meat come down!"

Following the soaring price of pork in May 2007, the prices of grain and vegetables in my country also followed closely. In August 5, the consumer price index (CPI) accelerated, and the snowstorm in early 2007 pushed prices to a peak. Since 8, my country's CPI has continued to increase. In February 2008, the CPI rose by 2008%, hitting a record high in the past 2008 years. Among them, the price of meat, poultry and its products rose by 2%, and the price of milk and dairy products rose by 8.7%.

2008年5、6、7三个月份CPI稍有走低。7月份CPI同比上涨6.3%，是2008年以来CPI涨幅连续第三个月走低，通胀压力得到稍微缓解。而CPI未来的发展尚不明显，仍有多种因素在制约CPI走势。

When prices rise, the currency starts to depreciate.If the price index rises by 10%, now 100 yuan can only buy things that 90 yuan can buy in the past, and the current 100 yuan is only worth 90 yuan in the past.If you want to lower the price level, you must first find the reason for the rise in prices.To understand this problem, we must first understand what CPI is.

my country's CPI index is calculated according to eight categories: food, tobacco, alcohol and supplies, clothing, household equipment and services, medical care and personal supplies, transportation and communications, entertainment, education, cultural supplies and services, and housing.The sum of the weights of these eight categories is 100.Among them, food accounts for the largest proportion.

Choose a representative product from each category of consumer goods, for example, whether most people eat rice or noodles, whether they wear leather shoes or cloth shoes, etc.The National Bureau of Statistics selects a certain number of representative products, converts the prices of these representative products into price indexes on a monthly, quarterly and annual basis, and regularly publishes them to the public. This is what we call the official CPI index.

CPI is an important indicator to reflect the consumption level of urban and rural residents and the price changes of consumer goods, and it is also an important indicator to observe the level of inflation.If the CPI has risen by 12% over the past 2.3 months, it means that the cost of living is now on average 12% higher than it was 2.3 months ago.Last year's 100 yuan can only buy goods or services worth 97 yuan this year. If the CPI rises too much, it means that the currency depreciates too much, and inflation becomes a factor of economic instability.Generally speaking, when the increase of CPI>7%, inflation has already been triggered; and when the increase of CPI>3%, it is already serious inflation.Generally, in this case, in order to curb inflation, the central bank will take fiscal policy measures such as monetary tightening.But such a move risks clouding the economic outlook.

CPI is often an important reference index for market economic activities and government monetary policy. CPI stability, full employment and GDP growth are often the most important socio-economic goals.

[links to related words]

The urban consumer price index is a relative number that reflects the trend and degree of changes in the prices of consumer goods and service items purchased by urban households.The urban consumer price index can observe and analyze the impact of changes in the retail price of consumer goods and service items on the monetary wages of employees, as a basis for studying the lives of employees and determining wage policies.

The consumer price index for rural residents is a relative number that reflects the trend and degree of changes in the prices of consumer goods and service items purchased by rural households.The consumer price index of rural residents can observe the impact of changes in the retail prices of rural consumer goods and service items on the living consumption expenditure of rural residents, directly reflect the actual changes in farmers' living standards, and provide a basis for analysis and research on rural residents' living problems.

(End of this chapter)