Description
Inflation and Analyses of Monetary Policies
Purpose of Assignment
This assignment will introduce students to the U.S. Department of Labor's Bureau of Labor Statistics (BLS) data and provide students with the skills to calculate inflation and interpret the Consumer Price Index (CPI). Note: The BLS is the primary source of information on inflation, but their data is re-posted in other sources, such as the St. Louis Federal Reserve FRED site, among others.
Assignment Steps
Resources: Tutorial help on Excel® and Word functions can be found on the Microsoft® Office website. There are also additional tutorials via the web offering support for Office products.
Use an internet search or the University Library to locate information on the Consumer Price Index (CPI). Internet sites you might find useful include the Bureau of Labor Statistics (BLS) and the Federal Reserve of St. Louis FRED web site although you are allowed to use other sources.
Develop a minimum 700-word analysis of inflation by including the following:
- Choose a product or service you currently consume/use, such as apparel or educational services, that is included in the CPI's "market basket." Find the annual CPI index numbers for your chosen good or service for the years 1995, 2005, 2010, and 2015. Enter those index numbers in an Excel® file and calculate the percent change (inflation rates) in those index numbers from 1995 to 2005, from 1995 to 2010, and from 1995 to 2015.
- Analyze the trends in overall inflation over the last five years and whether your income has kept pace with inflation. How has inflation over the last five years affected you and/or your family?
- Discuss how a business manager, such as a human resources manager, might use CPI statistics.
Cite a minimum of three scholarly, peer-reviewed references.
Format your paper consistent with APA guidelines.
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Explanation & Answer
Kindly see attached fileI'm sorry for the delay. I didn't have internet connection yesterday ;(
Running head: 5-YEAR INFLATION RATE
1
5-Year Inflation Rate
(Name)
(Course)
(Date)
5-YEAR INFLATION RATE
2
5-Year Inflation Rate
Bread is probably one of the most widely consumed food products worldwide. I
personally eat bread in nearly every meal. For this reason, I have selected this product for the
analysis of how the inflation rate has varied over the last 22 years.
The inflation rate is calculated as the variation in the consumer price index (CPI) as
indicated in the following formula:
𝐼=
𝐶𝑃𝐼𝑇 − 𝐶𝑃𝐼0
𝐶𝑃𝐼0
where CPIT is the consumer price index in the period of interest and CPI0 is the consumer price
index in the period considered as reference.
Table 1 shows the consumer price indices of bread in 1995, 2000, 2005, 2010 and 2015,
and the calculated inflation rates considering 1995 as the reference year. As can be observed,
Table 1: Inflation rate
Year
CPI
1995
2000
2005
2010
2015
1.154
1.358
1.287
1.880
1.949
Inflation rate
(%)
(Reference)
17.7
11.5
62.9
68.9
As can be observed, the inflation rate has increased by a 68.9% between 1995 and 2015.
However, such increase has not been gradual. In this regard, and as shown in the graph depicted
in figure 1, the steepest increase was from 2005 to 2010, where the CPI increased from 1.287 to
1.880. Such a steep increase may be the result of the global financial crisis of 2008 and 2009. On
the other hand, the graph shows how the inflation rate decreased between 2000 and 2005,
indicating that the wages perceived by employers increased more than the price of bread during
this period.
5-YEAR INFLATION RATE
3
Figure 1. Inflation rate
The inflation on the last five years, on the other hand, seems to have stabilized according
to the consumer price index of a basic product like bread. In this regard, and even while it has
still increased further from the level of 2010, the increase has been much smaller than the
previous five years. Nonetheless, the inflation rate on 2015 rose to its maximum level, which had
a significant impact on every day’s life.
In this regard, the high inflation rate in the past 5 years has had a very negative impact on
the purchasing power in my family. In this sense, the prices had risen at a much faster pace that
the salary of both of my parents which remained nearly constant over the last five years. In or...
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