______ is a fixed-weight index that is based on a consumption bundle actually purchased in the base year.
A) A Lespeyres price index
B) Compensating variation
C) Real income
D) The inflation rate

Question

Quizplus · Accepted Answer

A Lespeyres price index is a fixed-weight index that calculates the change in prices of a fixed basket of goods and services that were purchased in the base year, regardless of whether consumers are still purchasing the same items. This makes it a useful measure of inflation for producers and sellers who are interested in measuring the cost of their inputs, as well as for policymakers who need to track changes in the cost of living for consumers. Compensating variation and real income are related concepts that measure changes in consumer welfare, while the inflation rate is a measure of the overall increase in prices across an economy over time.

______ Is a Fixed-Weight Index That Is Based on a Consumption