The chained consumer price index
A) assumes that households purchase the same bundle of goods and services over a lengthy time period.
B) adjusts the quantities of the typical bundle purchased each month to reflect the substitution away from goods that have become more expensive.
C) reflects changes in the prices of all final goods and services produced domestically by the citizens of a nation during a period.
D) will generally result in a higher measured rate of inflation than the regular consumer price index.

Question

Quizplus · Accepted Answer

The chained consumer price index adjusts the quantities of the typical bundle purchased each month to reflect the substitution away from goods that have become more expensive. It is designed to provide a more accurate measure of inflation than the regular consumer price index and will generally result in a lower measured rate of inflation. Therefore, option A is incorrect. Option C is incorrect as the chained consumer price index reflects changes in the prices of a specific basket of goods and services. Option D is incorrect as the chained consumer price index generally results in a lower measured rate of inflation.

The Chained Consumer Price Index