Which Statement About the PPI Is True

question 31

Multiple Choice

Which statement about the PPI is true?

• A) The PPI is a good predictor of future consumer prices because increases in input prices eventually make it back to consumers.
• B) The PPI is more stable than the CPI over time.
• C) The PPI only measures the changes of input prices for firms that manufacture goods abroad.
• D) The PPI is the main indicator used by the Federal Reserve to track changes in the price level.

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Definitions:

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and included in the direct costs of production.

Variable Overhead

Costs that vary with the level of production or business activity, such as utilities or indirect materials.

Direct Material

Raw materials and components that are directly incorporated into a finished product and can be easily traced to the product.

Direct Labor-Hours

A measure of the hours worked by employees directly involved in the production process.