Basket Of Goods

AAA

DEFINITION of 'Basket Of Goods'

A relatively fixed set of consumer products and services valued and used on an annual basis to track inflation in a specific market or country. The goods in the basket are often adjusted periodically to account for changes in consumer habits The basket of goods is used primarily to calculate the Consumer Price Index (CPI).

INVESTOPEDIA EXPLAINS 'Basket Of Goods'

When conceptualizing a basket of goods, it is best to imagine a shopping basket. The basket contains everyday products such as food, clothing, furniture and financial services. As the products in the basket increase or decrease in price, the overall value of the basket changes. The CPI compares the value of the basket each year and determines the level of inflation for that period. The contents of the basket are subject to change each year.

RELATED TERMS
  1. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  2. Misery Index

    A measure of economic well-being for a specified economy, computed ...
  3. Producer Price Index - PPI

    A family of indexes that measures the average change in selling ...
  4. Inflation

    The rate at which the general level of prices for goods and services ...
  5. Deflation

    A general decline in prices, often caused by a reduction in the ...
  6. Economy

    The large set of inter-related economic production and consumption ...
RELATED FAQS
  1. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  2. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  3. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>
  4. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>
  5. What is the correlation between inflation and interest rate risk?

    There is a positive correlation between inflation and interest rate risk. Inflation basically occurs when there is too much ... Read Full Answer >>
  6. How do changes in interest rates affect the spending habits in the economy?

    Changes in interest rates can have different effects on consumer spending habits depending on a number of factors, including ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    Cost-Push Inflation Versus Demand-Pull Inflation

    Gain a deeper understanding of aggregate supply and demand, forces which raise the price of goods and services.
  2. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  3. Economics

    Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
  4. Bonds & Fixed Income

    Curbing The Effects Of Inflation

    Your investments suffer when general price levels rise. Learn how you can control the damage with IPSs.
  5. Economics

    What You Should Know About Inflation

    Find out how this figure relates to your investment portfolio.
  6. Savings

    Inflation for Dummies

    Inflation may seem like a straightforward concept, but it is more complex than it appears. We examine its varieties and causes.
  7. Economics

    How Does China Manage Its Money Supply?

    Here's how the Central Bank of China manages its currency rates and the money supply.
  8. Economics

    What Happens to the Economy If China Deleverages

    Attempts to deleverage and institute reforms that will foster more sustainable growth could exacerbate an already slowing Chinese economy.
  9. Economics

    Do Transport Stocks Signal a U.S. Selloff?

    The Dow Jones Transportation Average index has underperformed the broader DJ Industrials Average, leading some market watchers to speculate a selloff.
  10. Professionals

    The Most Popular ETFs with Financial Advisors

    Financial advisors might continue to perform well by holding these popular ETFs, but time is limited.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!