When We Are Calculating the Consumer Price Index and the Inflation

question 87

Multiple Choice

When we are calculating the consumer price index and the inflation rate for a certain year,

• A)the value of the consumer price index may depend on the choice of a base year,but the inflation rate does not depend on the choice of a base year.
• B)the inflation rate may depend on the choice of a base year,but the value of the consumer price index does not depend on the choice of a base year.
• C)both the value of the consumer price index and the inflation rate may depend on the choice of a base year.
• D)neither the value of the consumer price index nor the inflation rate depends on the choice of a base year.

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Definitions:

Purely Competitive

A market structure characterized by a large number of small firms, homogenous products, free entry and exit, and perfect information, leading to firms being price takers.

Marginal Revenue Product

The additional income yielded by deploying one more unit of a component, for instance, labor or capital.

Economic Resource

An asset that is used in the production of goods and services, including natural, human, and capital resources.

Product Price

The monetary value assigned to a good or service for sale.