Related to the Economics in Practice on p. 133: If a retiree's pension is tied to the CPI, her monthly pension check would tend to grow ________ if the pension is tied to the ________ CPI.
A) slower; fixed-weight
B) faster; chain-linked
C) faster; fixed-weight
D) The check would grow at the same rate regardless of the type of CPI to which it is tied.

Question

Quizplus · Accepted Answer

CPI measures inflation, and a fixed-weight CPI does not account for changes in consumer purchasing behavior in response to price changes, often resulting in a higher measured inflation rate compared to a chain-linked CPI, which adjusts for these changes. Therefore, if a pension is tied to the fixed-weight CPI, it would tend to grow faster due to the higher measured inflation rate.

Related to the Economics in Practice on P