The table below shows the monthly inflation rate using the CPI deflator in 2008.

The data show that
A) commodity substitution bias occurred in August.
B) an increase in food and energy prices occurred in July.
C) cost the CPI basket decreased over the 5- month period.
D) food and energy prices increased steadily over the period.

Question

The table below shows the monthly inflation rate using the CPI deflator in 2008.

The data show that
A) commodity substitution bias occurred in August. 
B) an increase in food and energy prices occurred in July. 
C) cost the CPI basket decreased over the 5- month period. 
D) food and energy prices increased steadily over the period.

Quizplus · Accepted Answer

The data shows an increase in the inflation rate in July, which suggests an increase in prices of food and energy (which are volatile components of the CPI and can heavily influence the overall rate). There is no evidence of commodity substitution bias or a decrease in the cost of the CPI basket over the period, and there is no information provided regarding a steady increase in food and energy prices.

The Table Below Shows the Monthly Inflation Rate Using the CPI