Which of the following statements would be true regarding different measurements of inflation in the U.S. since 2000?
A) The core PCE has tended to overstate the rate of inflation, while the sticky-price CPI and CPI have similar averages.
B) The sticky-price CPI has tended to understate the rate of inflation, while the CPI and core PCE have similar averages.
C) The sticky-price CPI has tended to overstate the rate of inflation, while the CPI and core PCE have similar averages.
D) The core PCE has tended to understate the rate of inflation, while the sticky-price CPI and CPI have similar averages.

Question

Quizplus · Accepted Answer

The core Personal Consumption Expenditures (PCE) Price Index, which excludes food and energy prices, has generally shown a lower rate of inflation compared to the Consumer Price Index (CPI). This is because the core PCE uses a different weighting scheme that reflects changes in consumer spending patterns more rapidly than the CPI. The sticky-price CPI, which measures prices that are slow to change, and the CPI have not consistently shown similar averages, but the core PCE's tendency to report lower inflation rates is a noted difference.

Which of the Following Statements Would Be True Regarding Different