The Relationship Between the Producer Price Index (PPI) and the Consumer

question 138

Multiple Choice

The relationship between the producer price index (PPI) and the consumer price index (CPI) is such that, in the short run

• A) the CPI usually increases before the PPI.
• B) the CPI and the PPI usually move simultaneously.
• C) the PPI usually increases before the CPI.
• D) the CPI and the PPI usually move in opposite directions.

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Definitions:

Horizontal Axis

A line on a graph or chart that runs left to right and usually represents the independent variable.

Vertical Axis

In a graph or chart, the y-axis, which typically measures the variable that is dependent on another variable measured along the horizontal axis.

Utility Function

A mathematical representation of how a consumer ranks different bundles of goods based on their level of satisfaction.

Corn Chips

Snack foods made from cornmeal and fried or baked in oil.