The Problems with Using the Consumer Price Index as a Measure

question 6

Multiple Choice

The problems with using the consumer price index as a measure of the cost of living are important because

• A)even the appearance of high rates of inflation cause voters to become disenchanted.
• B)politicians have manipulated the measurement problems to their advantage.
• C)many government programs use the CPI to adjust for changes in the overall level of prices.
• D)if the price level is overstated,consumers will be taken advantage of by sellers of consumer goods.

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Definitions:

Anticipation

The act of expecting or foreseeing something, often involving preparatory action or adjustments based on predictions about future events or trends.

Inflation

The speed at which the overall price level of goods and services increases, diminishing buying power.

Monetarists

Economists who believe that variations in the money supply have major influences on national output in the short run and the price level over longer periods, as well as on inflation.

Money Supply

The overall quantity of currency and other liquid instruments circulating in an economy at a particular time.