The Bank of Canada may use core CPI,which excludes items such as food and energy,as a measure of inflation because
A) food and energy are necessities, so consumers have no choice but to purchase these.
B) food and energy prices tend to remain stable in the short run, so are not relevant to the calculation of inflation.
C) including food and energy prices tends to overstate the true inflation rate by 0.5% to 1%.
D) food and energy prices tend to fluctuate up and down for reasons that may not be related to the general causes of inflation.

Question

Quizplus · Accepted Answer

Food and energy prices tend to fluctuate up and down for reasons that may not be related to the general causes of inflation. Therefore, they can skew the overall inflation rate and make it harder to accurately measure changes in the price level of goods and services. Core CPI allows the Bank of Canada to focus on price changes that are directly caused by changes in monetary policy and other economic factors, rather than short-term fluctuations in food and energy prices.

The Bank of Canada May Use Core CPI,which Excludes Items