The consumer price index:
A)tracks the value of output over time.
B)is not tied to cost-of-living adjustments.
C)doubles every five years in the economy.
D)is a weighted average of consumer prices.
E)is a broader price index measure than the implicit GDP deflator.

Question

Quizplus · Accepted Answer

The consumer price index, or CPI, is calculated as a weighted average of prices of a basket of goods and services purchased by households. This makes it a representative measure of consumer prices in an economy. Therefore, choice D is the correct answer. Choices A, B, C, and E are incorrect because tracking the value of output over time is the job of the GDP deflator, the CPI is tied to cost-of-living adjustments, the doubling of CPI every five years is not accurate, and the implicit GDP deflator is a broader measure of price changes but not broader than the CPI.

The Consumer Price Index