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December 1993

The Consumer Price Index: underlying concepts and caveats

Dennis Fixler

To properly use the Consumer Price Index, one must understand its relationship to an ideal cost-of-living index and the problems of implementation. This article reviews how the theory of the cost-of-living index (CLI) provides the conceptual foundation for the CPI and the caveats governing the use of the CPI as an approximation for a CLI.

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