How is the CPI constructed?
A)using a basket of goods and services that includes every item included in the nation's GDP
B)using a basket of goods containing an assortment of raw materials, intermediate goods, and final goods
C)using a basket of goods and services purchased by a typical urban consumer
D)using a basket of intermediate goods purchased by a typical business to use in the production process

Question

Quizplus · Accepted Answer

The CPI (Consumer Price Index) is constructed using a basket of goods and services that are typically purchased by urban consumers, including things like food, housing, transportation, and healthcare. This basket of goods is periodically updated to reflect changes in consumer spending patterns, and the prices of the goods in the basket are tracked over time to calculate inflation rates. Option A is incorrect because the CPI does not include every item included in the GDP. Option B is incorrect because the CPI focuses on final goods and services consumed by households, rather than raw materials or intermediate goods used in production. Option D is incorrect because the CPI does not focus on intermediate goods specifically, but rather on goods and services consumed by households.

How Is the CPI Constructed