How would you go about calculating inflation using CPI (consumer price index)

-       The consumer price index is the official measure of inflation in the UK -       2 surveys are conducted. The first survey is the Living Costs and Food surveys which involves approx. 7000 households completing self-reporting diaries of everything they buy including food which is eaten out. From this they compile a basket of the 650 most commonly bought items and attach weightings to each item. The weight reflects the proportion of income spent on that good. For example, milk Is likely to have a higher weighting than windscreen wipers.-       The second survey is called the Price survey where it involves civil servants comparing changes to the prices of the 650 items on a monthly basis. Because the same item can be bought in low cost and high cost shops they collect a total of 120,000 prices. The average change in prices of each item is multiplies by its weighting to determine a price index. The key feature of an index is that it has base year which is set equal to 100.

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