Which of the following measures gives the earliest warning of increasing inflation?
A) the Consumer Price Index
B) the Producer Price Index
C) the Personal Consumption Expenditure Index
D) All of these should signal the same short-run inflation.

Question

Quizplus · Accepted Answer

The Producer Price Index (PPI) gives the earliest warning of increasing inflation because it measures the changes in the prices of goods and services that businesses purchase from each other. Increases in PPI suggest that businesses are paying more for inputs, which may eventually lead to higher prices for consumers. The Consumer Price Index (CPI) and the Personal Consumption Expenditure Index (PCE) reflect the prices paid by consumers, and may not show the full impact of rising input costs until later.

Which of the Following Measures Gives the Earliest Warning of Increasing