Which of the following statements is true of the Consumer Price Index (CPI)?
A)It uses the same basket of goods and services as the Producer Price Index.
B)The quantities of items in the current year are used for computing the weights for the index.
C)It is an unweighted price index used to measure inflation.
D)It is based on the prices paid by urban consumers for a representative basket of goods and services.

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) is based on the prices paid by urban consumers for a representative basket of goods and services, making option D the correct choice. Option A is incorrect as the Consumer Price Index and Producer Price Index use different baskets of goods and services. Option B is incorrect as the quantities of items in the base year are used for computing the weights for the index, not the current year. Option C is also incorrect as the CPI is a weighted index that measures the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.

Which of the Following Statements Is True of the Consumer