An advantage of the personal consumption expenditures price index (PCE)over the Consumer Price Index (CPI)as a measure of inflation is that the PCE
A)is a more narrow,focused measure of inflation.
B)is a chain-type price index that allows the mix of products to change each year.
C)includes the prices of industrial equipment.
D)includes the prices of goods,but not services.

Question

Quizplus · Accepted Answer

The PCE is a chain-type price index, which means it allows the mix of products to change each year. This is an advantage over the CPI, which uses a fixed basket of goods and does not adjust for changes in consumer preferences. The PCE also includes a broader range of goods and services than the CPI, making it a more comprehensive measure of inflation. It does include the prices of services, which account for a larger share of household spending than goods. The PCE also excludes the prices of industrial equipment, so answer choice C is incorrect. Answer choice A is incorrect because the PCE is actually a broader measure of inflation than the CPI. Answer choice D is incorrect because the PCE includes the prices of both goods and services.

An Advantage of the Personal Consumption Expenditures Price Index (PCE)over