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Glossary / Key Concepts

Let's Party Like It's 1973!


  • A lot of people claim that the average American hasn’t made a lot of progress over the last thirty to forty years.
  • Measuring economic progress requires an accurate measure of inflation.
  • As goods and services improve rapidly over time, it is more likely that inflation will be overestimated and changes in the standard of living will be underestimated.
  • Our measures of inflation don’t accurately capture the change in purchasing power over long periods of time.
  • The measure of our standards of living relative to the past is probably inaccurate.


Inflation - Inflation is a continuing increase in the average level of prices in the economy. It is measured by sampling a basket of goods and comparing the prices of the goods in the basket to the prices of those goods in the past. Measuring inflation or the price level at any point in time is complicated by changes in the quality of the goods being sampled for measurement and the changing consumption patterns of consumers.   

Quintile - One fifth of a given population. If there are 100 people, each quintile has exactly twenty people. When there are 100 households, a quintile has 20 households but may have more or fewer than a fifth of the overall population because household size varies.                

Middle-Quintile Households - Households that earn more than the bottom 40% and less than the top 40%.

CPI-U - A Consumer Price Index (CPI), calculated by the Bureau of Labor Statistics, measuring the changes in goods and services purchased by urban consumers.

PCE – A price index based on personal consumption expenditures from the calculated by the Department of Commerce's Bureau of Economic Analysis. Used by the Congressional Budget Office and Federal Reserve, it includes both urban and rural consumers and calculates the prices of housing and healthcare differently from the CPI-U. It is a chained index, correcting for consumer substitution toward cheaper goods when prices rise.