Purpose of Assignment This assignment will introduce students to the U.S. Depart
ID: 1130818 • Letter: P
Question
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. Click the Assignment Files tab to submit your assignment.
Explanation / Answer
Consumer Price Index and Inflation
Inflation refers to rise in products prices especially those in consumer basket. According to Federal Reserve of St Louis website, coffee’s Consumer Price Index has been changing overtime. To be precise, since the year 1995 to 2015. The fives will under focus to help in computing inflation.
Inflation = [(CPI1-CPI0)/CPI0]*100
The formulae above aid in calculation of inflation
Where CPI0 represent previous year
CPI1 represents the following year.
The inflation rate has been increasing since the 1995 all through to 2010. However, between the year 2010 and 2015 the inflation rate declined a little though it was still high from the economic point of view. It therefore clearly indicates that coffee prices have been rising since 1995 to 2010 but fell a little between 2010 and 2015 due to a negative rise in inflation rate from 21.73% to 12.15%. High inflation rates in any economy poses very serious and adverse economic impacts to the households and nation’s economy at large. It is a desire for every nation to try and minimize inflation level in its economy to improve the living standards of citizens, raise the purchasing power of its currency and make sure it has a positive balance of trade and payments in its GDP. Maintaining low inflation levels helps in ensuring that the country’s Real Gross Domestic Product increases positively. The latter makes the country competitive in the market. The rise in inflation rate over the five years may have been geared by reduced coffee supply in US, or high demand of the product, high cost of processing, political instability and high level of taxes. The rising level of inflation cause the cost of living to be much expensive, cost of making investment rises and many people end up unemployed due to low employment opportunities, also the interest rates rises that causes dissaving among the employed personnel. It is there important to manage inflation levels at all costs. Additionally, high inflation levels causes overspending resulting to households operating on negative budgets resulting on heavy debts to finance the basic needs.
Over the last five years my income has failed to match with the inflation rate because the human resource manager fails to match the level of income increment with the rising level of inflation rate over time. The situation has subjected my income under stress since products are much expensive than before. The evidence above shows how inflation may impacts ones income. The value of a single dollar of income loses value as income levels rises. Very high level of inflation reduces the amount a household can buy in a consumer basket. Therefore, it makes a lot of sense if the government can try and reduce the level of inflation either through monetary on fiscal policies. Inflation affected my buying power because it meant I had to more for the same goods and services. Also an asset bubble affected my income and in overall my family especially when it was about to burst causing me to live at a lower standard than before. It made me spend me immediately rather than later and therefore I was not able to save for my family’s education and luxurious lifestyle like before. It also affected by retirement planning because I had to make higher contributions toward the scheme ("How Does Inflation Impact My Life?” 2017).
The CPI is a program that is ran by the US Department of Labor and it produces monthly data on dynamics in product prices over time for a representative consumer basket of products. CPI is very important to human resource manager because it serves as a necessary tool in determining by how much the employees’ should be revised. The greater the changes in the CPI between successive years, the higher the salary increment. The revision helps to ensure that employees are able to keep up with the rising products’ prices. Compensation professionals uses CPI to help guide merit increase budgets and determine the cost of living increases. The indexes are also used in the implementation of adjustments to formal pay grade structures.
Year Coffee Consumer Price Index % inflation % Inflation Inflation over the five years Inflation over the five years 1995 172.9 N/A 0 2000 157 [(157-172.9)/172.9]*100 -9.196067091 2005 151.7 [(151.7-172.9)/172.9]*100 -12.2614228 [(151.7-157)/157]*100 -3.375796178 2010 184.667 [(184.667-172.9)/172.9]*100 6.805668016 [(184.667-151.7)/151.7]*100 21.73170732 2015 207.111 [(207.11-172.9)/172.9]*100 19.78658184 [(207.11-184.667)/184.667]*100 12.15376868Related Questions
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