Economists Agree That the Structure of the Consumer Price Index

question 397

Multiple Choice

Economists agree that the structure of the Consumer Price Index has some problems that limit its usefulness as a reliable measure of inflation. What is one of these drawbacks?

• A) It is based on the faulty assumption that each consumer buys only one unit of each item.
• B) It is based on the faulty assumption that consumption choices are not influenced by income levels.
• C) It ignores changes in consumption patterns brought about by changes in the relative prices of consumer goods.
• D) It is based on a market basket of mail-order items and does not include the goods that consumers typically purchase.

---

Definitions:

Years

A term referring to the span of time equivalent to 365 days or 12 months, typically used in the context of age, experience, or historical periods.

Y-Intercept

The point where a line or curve intersects the y-axis of a coordinate system.

Vertical Spread

A strategy in options trading that involves purchasing and selling of two options of the same type and expiration date but different strike prices.

Data Points

Individual values or measurements that are collected through observation and are represented in a data set.