An advantage of the personal consumption expenditures price index (PCE) over the consumer price index (CPI) as a measure of inflation is that the PCE
A) includes the prices of consumer goods, but not consumer services.
B) includes the prices of consumer services, but not consumer goods.
C) includes the prices of more consumer goods and services.
D) is a fixed market-basket price index that does not allow the mix of products to change each year
An advantage of the personal consumption expenditures price index (PCE) over the consumer price index (CPI) as a measure of inflation is that the PCE
A) includes the prices of consumer goods, but not consumer services.
B) includes the prices of consumer services, but not consumer goods.
C) includes the prices of more consumer goods and services.
D) is a fixed market-basket price index that does not allow the mix of products to change each year
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There are many different types of market baskets that economists measure. For example, the market basket for consumers called the 'Consumer Price Index' tracks the prices associated with the typical consumer's purchases of goods and services. The 'Producer Price Index' tracks the prices that firms receive when selling their goods and services.
Indicate the appropriate market basket to use in each of the following instances.
Consumer Price Index:
| a) | Measuring differences in the cost of living between different cities. |
| b) | Examining price changes that might affect businesses. |
| c) | Measuring the cost of living for a typical consumer. |
Producer Price Index:
| A) | Measuring differences in the cost of living between different cities. |
| B) | Examining price changes that might affect businesses. |
| C) | Measuring the cost of living for a typical consumer. |
