CPI Basics
The most well known and widely quoted economic indicator is the CPI (Consumer Price Index).
It represents an estimation of the change in prices of consumer goods and services. Generally, it represents a measurement of our expenses on goods and services we use to meet our day-to-day needs.
Severe problems to the overall economy can be caused if the prices of consumer goods and services are abruptly changed.
The CPI includes the measurement in the prices of a basket of goods and services that we use in our daily lives. It is compiled by the Department of Labor's Bureau of Labor Statistics. In order to get the final result for the CPI, wide researches of the prices of the included in the consumer basket goods and services are made. Then they are entered into a special computer program that makes the calculations.
The CPI includes several indexes. But the one that is most widely used covers approximately 87% of the population of the US.
Most people associate the concept of CPI with inflation. An increase in the value of the CPI means that an increase in inflation has been observed.
The importance of CPI is also viewed in the fact that the estimations of other products, services and benefits are directly linked to the levels of the CPI. For example, if the CPI experiences an increase in its value, then the Social Securities benefits will rise as well.
Other things that are directly linked to CPI include:
- Wages
- Lease agreements
- Union contracts
- Benefit statements and etc.
If the value of the CPI decreases we refer to it as deflation. Recently no deflation has been observed in the US. However, its effects should not be underestimated since it may causes problems that are as serious as those caused by inflation.
Finally, if CPI moves to high levels combined with high interest rates, then serious damages to the market can be experienced. In order to insure your money against the negative effects of such market conditions it is recommended to hold them in precious metals, real estate or other hard assets.
To be a successful investor you need two main things - the knowledge and the right trading platform. For a trading platform we can recommend try you Zecco and TradeKing
.
Zecco offers free stock trades, no account minimum, real time quotes, trading community, and is also insured and protected against loss by SIPC.
Opening a Zecco account to benefit from $0 Stock/ETF trading is a smart idea. Free stock trades allow you to preserve more of your wealth and save money, which you can invest instead of paying brokerage commissions.
TradeKing has been rated #1 Discount Broker by SmartMoney’s (the Wall Street Journal Magazine) annual US broker survey. It was also awarded the highest 4-star ranking in Barron's survey of Best Browser-Based Online Brokers. TradeKing platform features real-time portfolio information, advanced order entry, stock, option and mutual fund screeners, customized charting and alerts, volatility charts, a pricing probability calculator, free research and integrated news, and interactive educational information. Open a TradeKing account here
| Rate this article : Low | High |
- Stock Investing vs. Saving
- Mutual Funds vs Individual Stocks
- Classes of Assets - Asset Class Definition
- Investment Goals Planning
- Stock Investing Basics
- Bond Definition and Concepts
- Zero Coupon Bonds Basics
- Convertible Bonds Basics
- US Treasury I Bonds Basics
- Discount Stock Brokers vs Full Service Brokers
- Financial Advisor Job Description
- Certified Financial Planner Designations
- Stock Broker Categories
- Types of Brokerage Accounts
- Stock Buyback Reasons
- Stock Basics
- Stock Dividends Basics
- Stock Market Cycles
- Federal Reserve Board (Fed) Functions and Importance
- Stock Market Sectors Classification
- Stock Split Basics
- Stock Market Indexes and Fair Value Indications
- Stock Share Types
- Bid and Ask Prices
- Stock Trading Basics and Order Types
- Market Makers Role and Responsibilities
- NYSE and Market Specialists
- Company Market Capitalization
- Stock Order Types
- Setting Stock Prices
- Newspaper and Online Stock Quotes
- Stop Loss Order Fundamentals
- Trailing Stop Order Basics
- Book Value Explanation
- Dividend Yield Explanation
- Stock Price Influences
- Advance Decline Ratio Basics
- Value Investing Basics
- Rising Interest Rates and their Effects
- Foreign Stocks Basics
- Asset Allocation Basics
- Stock Market Movements
- Earnings Season Basics
- CPI Basics
- Inverted Yield Curve Implications
- IPO Basics and Strategies
- Option Basics and Types
- Consumer Price Index Basics
- Stock Market Investing Basics
- Why Do Companies Go Public
- Introduction to Stocks
- Stock Price Volatility
- Large Cap Stock Characteristics
- Small Cap Stocks Characteristics
- Foreign Stock Characteristics
- Technology Stock Characteristics
- Fundamental Analysis Technique Basics
- Technical Analysis Basics
- Importance of Current Assets and Current Liabilities
- Price/Book Value Advantages and Disadvantages
- Understanding Return on Equity and Return on Assets
- Understanding Inventory Turnover Ratio
- Price to Earnings Growth Ratio (PEG) Explanation
- Price to Earnings (P/E) Ratio Basics
- Price to Sales Ratio (PSR) Explanation