Economics becomes a science · 1770s–1920s
1919
Measuring the cost of living
US prices jump during World War I, and the government starts tracking a basket of goods.
Prices rose sharply during World War I. In 1919 the Bureau of Labor Statistics began publishing a cost-of-living index for US cities, the start of today's Consumer Price Index.
💡 Why it made sense then
Workers and employers needed a fair way to adjust wages as prices rose.
Ideas it gave us
- 🌍 CPI (consumer price index)
The consumer price index tracks the price of a fixed basket of goods and services that households buy. Its percentage change over a year is the most quoted measure of inflation.
- 🌍 Inflation
Inflation is the rate at which prices across the economy rise over time, so each dollar buys less. The US Federal Reserve targets 2% a year.
Practise with $10,000 in play money
Free. No real money involved.