If housing prices increase by 25% and the price of all other goods decreases by 22%,then:
A) the consumer price index (CPI) would definitely fall during the year in question because housing prices do not constitute the majority of the CPI.
B) the CPI would definitely rise during the year in questions because housing prices do constitute the majority of the CPI.
C) the CPI would rise by about 1.5% because housing constitutes about half of the market basket in the CPI.
D) because housing spending is considered investment, the producer price index (PPI) but not the CPI would be the only price index affected by the change.
E) the CPI would only be affected in a small way because it includes about 8,000 goods and housing is only one of the 8,000.

Question

Quizplus · Accepted Answer

The CPI would likely fall because the decrease in the price of all other goods by 22% would outweigh the 25% increase in housing prices, given that housing does not constitute the majority of the CPI.

If Housing Prices Increase by 25% and the Price of All