A price index measures the changes in the cost of a market basket relative to the cost in a base time period. It is used to track inflation or deflation in an economy and is not specific to rural consumers or daily changes in the cost of a market basket. It can be used for both consumer and non-consumer goods and services.

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A Price Index

Question 15

Multiple Choice

A price index:

A) measures how much the cost of a market basket has risen or fallen relative to the cost in a base time period.
B) summarizes the changes in the cost of living for only rural consumers.
C) allows us to see clearly the changes in the cost of a market basket daily.
D) is generally only used with consumer goods and services

Correct Answer: