The "core" inflation rate is typically defined as the change in consumer prices for all goods included in the CPI basket except energy and food products. Suppose the overall inflation rate based on the CPI was 4 percent for the past year, and energy and food prices did not change during the year. Is the core inflation rate for the past year higher or lower than 4 percent?
A) Higher
B) Lower
C) They are the same.
D) We do not have enough information to answer this question.

Question

Quizplus · Accepted Answer

Since energy and food prices did not change, they did not contribute to the overall inflation rate. Therefore, the inflation for the remaining items in the CPI basket must have been higher than 4 percent to achieve an overall inflation rate of 4 percent, making the core inflation rate higher.

The "Core" Inflation Rate Is Typically Defined as the Change