Market Instability and Consumer Price Index

This article discusses the markets recent instability, and the potential that it will continue to be unstable throughout the year. It gives the percent changes of the major stock indexes, most commonly the Dow Jones Industrial Average. This is a compilation of many stocks in the New York Stock Exchange. This Percentage change in the DOW can help one better understand the Consumer Price Index by comparing the way they are calculated.
The Dow Jones Industrial Average is a compilation of many different stocks. The Consumer Price Index is a compilation of goods that the average household buys. By adding all of the stocks making up the DOW, the result is the overall price for that specific “basket of stocks.” The CPI is found by adding the total amount for that specific “basket of goods.” For example, if a single good in the CPI costs more, the overall CPI still might not raise because other goods could cost less. Stocks in the DOW raise and fall frequently, yet the DOW raises and falls according to the overall trends. Similar to the CPI, the stock price for for the DOW may not necessarily raise or fall in accordance with a single good or stock.
The overall percentage change in the CPI or the DOW would be calculated by taking the new price for the total goods or stocks minus the old price for the same goods and stocks then dividing that amount by the original price. This would result in either a positive or negative number correlating with either an inflation or deflation, assuming there is a change. By understanding how stock prices for the DOW function, one can compare and better understand how the Consumer Price Index is found.