Which one of the following statements is TRUE of the Consumer Price Index?
A) It does not take account of the price of imported goods and services.
B) It measures changes in prices of a fixed basket of goods.
C) It does not take into account the price of used goods.
D) It understates the true rate of inflation.

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) measures changes in the prices of a fixed basket of goods and services over time, so option B is true. Option A is false because the CPI does include imported goods and services. Option C is partially true because the CPI measures the prices of new goods but not used goods. Option D is subjective; some economists believe that the CPI overstates or understates inflation, depending on how it is calculated and which goods and services are included.

Which One of the Following Statements Is TRUE of the Consumer