I the CPI Is Not Just One Index, but Includes

question 85

Multiple Choice

i. The CPI is not just one index, but includes a large number of groups, subgroups and selected
Items, such as a food index, a transportation index and a shelter index.
ii. The Consumer Price Index is based on more than 600 separate goods and services used by most
Urban and rural families.
iii. One function of CPI is to allow consumers to determine the degree to which their purchasing
Power is being eroded by price increases and as such, it is a metrestick for revising wages,
Pensions and other income payments to keep pace with changes in prices.

• A) (i), (ii), and (iii) are all correct statements.
• B) (i) and (ii) are correct statements but not (iii).
• C) (i) and (iii) are correct statements but not (ii).
• D) (ii) and (iii) are correct statements but not (i).
• E) (i), (ii), and (iii) are all false statements.

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Definitions:

Money Supply

The total economic resources available in an economy at a certain period, including cash, coins, and the money in checking and savings accounts.

Inflation Tax

The implicit tax that holders of cash experience due to a decrease in purchasing power caused by inflation.

Printing Money

The process by which the central bank of a country increases the amount of currency in circulation, often leading to inflation if not carefully managed.

Nominal Interest Rate

The nominal interest rate refers to the percentage increase in money that the borrower pays the lender, excluding any adjustments for inflation.