The consumer price index (CPI) and the producer price index (PPI) differ from each other since

Question

Quizplus · Accepted Answer

The CPI and PPI have different market baskets, meaning that they measure different types of goods and services. The CPI measures the prices of a fixed basket of goods and services bought by consumers, while the PPI measures the prices of goods and services used as inputs by producers. Therefore, their price movements may differ. The other choices are incorrect: A is incorrect because the PPI does not necessarily include all import goods; B is incorrect because there is no general rule about which index rises sooner; D is incorrect because the PPI does measure price changes of a fixed basket of goods and services used as inputs by producers; E is incorrect because both indexes can sometimes overestimate or underestimate inflation.

The Consumer Price Index (CPI) and the Producer Price Index