-Think about your current situation and what happens when prices increase generally. There are several methods that can be used to measure changes in prices but one of the most commonly used method is the CPI.

1. Describe how is the CPI derived and what purpose does it serve?

2.What is the difference between the CPI and the GDP Deflator?

3.Define demand pull inflation and cost push inflation.

4. The salary of the president of the United States in 2000 was $400,000. In 1940, the president's salary was $75,000. If the Consumer Price Index was 8.1 in 1940 and 100 in 2000, the 1940 presidential salary measured in terms of the purchasing power of the dollar in 2000 would be: