One Improvement of the Chained Consumer Price Index (CPI)over the Traditional

question 173

Multiple Choice

One improvement of the chained consumer price index (CPI) over the traditional CPI is that the

• A) chained CPI more quickly takes into account new goods.
• B) chained CPI accounts for substitution between goods.
• C) chained CPI is "progressive," whereas the traditional CPI is "regressive."
• D) traditional CPI accounts only for the prices of goods,whereas,the chained CPI accounts for the prices of services,as well.
• E) chained CPI more easily accounts for deflation.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in its price, with elasticity referring to the degree of responsiveness.

Good Substitutes

Products or services that can be used in place of each other, having a high cross-elasticity of demand.

Income Elasticity Coefficient

A measure indicating how much the quantity demanded of a good responds to change in consumer income.

Recessions

Periods of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in successive quarters.