Because Increases in Input Prices Eventually Make It to Consumers

question 58

Multiple Choice

Because increases in input prices eventually make it to consumers when they buy the final product, the PPI:

• A) is considered a good predictor of future consumer prices.
• B) is a lag variable for inflation.
• C) accounts for inflation before it reaches consumers, adjusting the CPI downward.
• D) accounts for inflation before it reaches consumers, adjusting the CPI upward.

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Definitions:

Economic Losses

Financial deficits incurred by businesses or individuals, often resulting from poor investment decisions or market downturns.

Profit-Seeking

The motivation or driving force behind individuals or companies to undertake activities that increase earnings and reduce costs, in order to maximize profits.

Major Oil Companies

Large, often multinational companies, engaged in the exploration, extraction, refining, and selling of oil and petroleum products.

Department Stores

Large retail establishments that offer a wide variety of goods divided into departments under one roof, including clothing, household goods, and other consumer products.