Which of the following statements is true?
A) One benefit with any fixed-bundle index as a measure of the cost of living is that it does not account for substitutions that consumers might make in response to price changes.
B) The producer price index is considered to be a leading indicator of future inflation rates.
C) The best overall indicator of inflationary pressures in the economy is the CPI.
D) The consumer price index somewhat understates changes in the cost of living.

Question

Quizplus · Accepted Answer

The producer price index (PPI) is considered a leading indicator of future inflation rates because it measures the average changes in prices received by domestic producers for their output, which often precede changes in consumer prices, thereby providing early signals of future inflation trends.

Which of the Following Statements Is True