To compute the real income of a household,the index that should be used is the
A)Producer Price Index (PPI).
B)Consumer Price Index (CPI).
C)GDP deflator.
D)Cost of Living Adjustment (COLA).

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) measures price changes of goods and services commonly purchased by households. It is used to adjust wages and salaries, taxes, social security benefits, and other payments that are tied to inflation. Therefore, CPI is the best choice to compute the real income of a household as it reflects changes in the cost of living over time.

To Compute the Real Income of a Household,the Index That