Question

QUESTION 1

1. During the financial crisis of 2008 -2009 CPI in the USA decreased dramatically. What can explain such a decrease? What elements of the CPI basket were affected by the crisis and why? How do you think the CPI will change in 2020?

   urgent!! please give short answers thank you

Answer 1

During the financial crisis of 2008 -2009 CPI in the USA decreased dramatically. What can explain such a decrease?

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living. CPI is the most popular way to measure inflation.

During the financial crisis of 2008 -2009 CPI in the USA decreased dramatically. because thats time inflation rate are higher and unemploment rate are also increase so people cant afford cost of living. This all factors affect on GDP. The 2008 financial crisis was the worst economic disaster since the Great Depression of 1929. It occurred despite the efforts of the Federal Reserve and U.S. Department of the Treasury. The crisis led to the Great Recession, where housing prices dropped more than the price plunge during the Great Depression. Two years after the recession ended, unemployment was still above 9% so by this crisis USA decreased dramatically.

What elements of the CPI basket were affected by the crisis and why?

CPI is calculated for a fixed list of items including food, housing, apparel, transportation, electronics, medical care, education, etc.In 2008-09 crisis housing element are most affected by the crisis because in this crisis are housing price are dropped so much. Value of house are decrease so much and no one want to buy house thats time.

How do you think the CPI will change in 2020?

In first 3 or 4 months CPI is higher because of the corona crisis and lockdown. In lockdown of many countries transaction of many goods and services are close or so much low like aviation industry. Consumers purchasing behaviour has changed so they are buy only necessary items of goods. In this time inflation rate and unemployment rate are also increase by this pandemic. after middle of year 2020 so many coutries remove restriction on lockdown so cpi change again to downword.