Author Question: Name two major criticisms of the Consumer Price Index (CPI). ... (Read 51 times)

tichca · **on:** Jul 24, 2018

Name two major criticisms of the Consumer Price Index (CPI).

Question 2

Which of the following is not true about the Consumer Price Index (CPI)?
a. It is always a number greater than or equal to 100.
b. It is the most widely used measure of inflation in the U.S.
c. Its base year changes periodically.
d. All of the above statements are true about the CPI.

mcabuhat · **Reply #1 on:** Jul 24, 2018

Answer to Question 1

ANY TWO OF THE FOLLOWING ARE OK: 1) THE MARKET BASKET MAY NOT REFLECT CURRENT SPENDING PRIORITIES; 2) IF THE PRICE OF ONE ITEM RISES, CONSUMERS ARE LIKELY TO SUBSTITUTE ANOTHER; 3) THE CPI DOES NOT ADJUST FOR CHANGES IN QUALITY; 4) THE CPI DOES NOT TAKE ADVANTAGE OF SALE PRICES; 5) THE CPI DOES NOT MEASURE PRICES FOR RURAL AMERICANS.

Answer to Question 2

A