Explain how the Consumer Price Index (CPI) is

constructed and use it to calculate the inflation

rate

2.

Show how the CPI is used to adjust economic data

to eliminate the effects of inflation

3.

Discuss the two most important biases in the CPI

4.

Distinguish between inflation and relative price

changes to find the true cost of inflation

5.

Understand the connections among inflation,

nominal interest rates, and real interest rates