Question

Project 4

Prepare a chart of your major expenses and check the impact of inflation by using inflation calculator and make a comparative analysis for the year 2010 and 2019? You can use the link : https://www.bankofcanada.ca/rates/related/inflation-calculator/   (Eg: A car that costs $ 5000 in 2010 will cost $5804.26 in 2019 )

• Explain the concept behind the calculator’s calculation.
• What are the major item baskets for determining Canada’s CPI? What is the weightage of each item in the item basket?

Answer 1

The Consumer Price Index (CPI) is one of the most widely-known, quoted and utilized economic indicators in Canada and is of interest to a wide range of users. It can be used to compare, through time, the cost of a fixed basket of goods and services purchased by consumers. The CPI is used for economic analysis and provides insight into overall economic conditions.

The Consumer Price Index classification of goods and services is organized according to a top-down hierarchical structure (see diagram below). At the top of the structure is the all-items CPI, which contains eight major components. Below the eight major components are intermediate level aggregates, such as owned accommodation and operation of passenger vehicles, which, along with the major components, provide insight into the sources of monthly and annual price change. There are 177 basic aggregates.^Note These basic aggregates are typically the result of aggregating one or more elementary aggregates, many of which are unpublished.

The Inflation Calculator uses monthly consumer price index (CPI) data from 1914 to the present to show changes in the cost of a fixed "basket" of consumer purchases. These include food, shelter, furniture, clothing, transportation, and recreation. An increase in this cost is called inflation.

The calculator's results are based on the most recent month for which the CPI data are available. This will normally be about two months prior to the current month.

CPI Comparative Analysis

Serial No.	Category	Item Cost in $ in 2010	Item Cost in $ in 2019	Percentage Change
01	Food	1000	1160.85	16.09
02	Clothing	750	870.64	16.09
03	Household Operation	1200	1393.02	16.09
04	Education & Reading	500	580.43	16.09
05	Transportation	500	580.43	16.09