The Chained Consumer Price Index (CPI) Is a Better Measure

question 109

Multiple Choice

The chained consumer price index (CPI) is a better measure of prices than the traditional CPI:

• A) because it contains producer prices, not just consumer prices.
• B) because it adjusts for price changes less frequently but across more goods.
• C) because it adjusts for price changes more often, especially when new goods are introduced, which is important because new products' prices tend to fall soon after introduction.
• D) because the chained index is called "chained" because it includes industrial goods that are not included in the traditional CPI.
• E) because while omitting producer prices, it includes substitution between goods as relative prices change.

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Definitions:

Cash Budget

A detailed plan that estimates all cash inflows and outflows over a specific period to manage a company's cash flow.

Accounts Receivable

Money owed to a company by its customers from goods or services sold on credit.

Budgeted Balance Sheet

A financial statement that projects the financial position of a company at a future date, based on budgeted transactions.

Schedule of Cash Receipts

A detailed plan or report of the expected times and amounts of incoming cash to the business.