Comparing the core inflation rate to the Consumer Price Index, the core inflation rate
A)controls for the biases of the CPI.
B)measures all goods produced, not just consumer goods.
C)uses current period quantities, not base period quantities.
D)excludes the volatile elements of the CPI.
E)includes volatile elements not in the CPI.

Question

Quizplus · Accepted Answer

The core inflation rate excludes the volatile elements of the CPI, such as food and energy prices, to provide a more stable measure of underlying inflation trends. This is in contrast to the CPI, which measures the average change in prices for a specific basket of goods and services consumed by households. The other choices are incorrect: A is incorrect because the core inflation rate only excludes volatile elements, it does not control for biases in the CPI; B is incorrect because the core inflation rate only measures consumer goods and services; C is incorrect because the core inflation rate uses current period and base period quantities; and E is incorrect because the core inflation rate excludes volatile elements that are not in the CPI, not including them.

Comparing the Core Inflation Rate to the Consumer Price Index