CPI THIRD (3RD) EDITION PRACTICE
EXAMINATION 2026 QUESTIONS
WITH ANSWERS GRADED A+
◍ What is inflation?.
Answer: An increase in the overall price level in the economy.
◍ What is the Consumer Price Index?.
Answer: A measure of the overall cost of goods and services bought by a
typical consumer
◍ What does CPI measure over time?.
Answer: Changes in the cost of living
◍ What does CPI specifically measure?.
Answer: The cost of a fixed basket of goods and services relative to a base
year
◍ What is Core CPI?.
Answer: CPI excluding food and energy
◍ What is the Producer Price Index (PPI)?.
Answer: Prices received by producers
◍ What does deflation mean?.
Answer: The opposite of inflation; a decrease in the price level.
◍ Step 1 of CPI calculation.
Answer: Fix the basket
◍ What is disinflation?.
Answer: A decrease in the rate of inflation.
◍ Step 2 of CPI calculation.
, Answer: Find prices
◍ Step 3 of CPI calculation.
Answer: Compute basket cost
◍ Step 4 of CPI calculation.
Answer: Choose base year and calculate CPI
◍ Why is inflation important?.
Answer: It affects purchasing power, standard of living, cost of living, and
future uncertainty.
◍ What is purchasing power?.
Answer: The number of goods that can be purchased with a certain amount
of money.
◍ What is a price index?.
Answer: A measure of how prices change over a period of time.
◍ What are the most popular price indices?.
Answer: CPI (Consumer Price Index), GDP Deflator, PPI (Producer Price
Index), PCE (Personal Consumption Expenditures).
◍ CPI formula.
Answer: (Cost this year / Cost base year) × 100
◍ What is inflation?.
Answer: Increase in overall price level
◍ Inflation formula.
Answer: [(CPI this year − CPI last year) / CPI last year] × 100
◍ What is the first step in constructing the CPI?.
Answer: Fix the 'basket' of goods that American families are consuming.
◍ What is substitution bias?.
Answer: Consumers switch to cheaper goods
◍ What is the new goods problem?.
Answer: CPI doesn't include new products
EXAMINATION 2026 QUESTIONS
WITH ANSWERS GRADED A+
◍ What is inflation?.
Answer: An increase in the overall price level in the economy.
◍ What is the Consumer Price Index?.
Answer: A measure of the overall cost of goods and services bought by a
typical consumer
◍ What does CPI measure over time?.
Answer: Changes in the cost of living
◍ What does CPI specifically measure?.
Answer: The cost of a fixed basket of goods and services relative to a base
year
◍ What is Core CPI?.
Answer: CPI excluding food and energy
◍ What is the Producer Price Index (PPI)?.
Answer: Prices received by producers
◍ What does deflation mean?.
Answer: The opposite of inflation; a decrease in the price level.
◍ Step 1 of CPI calculation.
Answer: Fix the basket
◍ What is disinflation?.
Answer: A decrease in the rate of inflation.
◍ Step 2 of CPI calculation.
, Answer: Find prices
◍ Step 3 of CPI calculation.
Answer: Compute basket cost
◍ Step 4 of CPI calculation.
Answer: Choose base year and calculate CPI
◍ Why is inflation important?.
Answer: It affects purchasing power, standard of living, cost of living, and
future uncertainty.
◍ What is purchasing power?.
Answer: The number of goods that can be purchased with a certain amount
of money.
◍ What is a price index?.
Answer: A measure of how prices change over a period of time.
◍ What are the most popular price indices?.
Answer: CPI (Consumer Price Index), GDP Deflator, PPI (Producer Price
Index), PCE (Personal Consumption Expenditures).
◍ CPI formula.
Answer: (Cost this year / Cost base year) × 100
◍ What is inflation?.
Answer: Increase in overall price level
◍ Inflation formula.
Answer: [(CPI this year − CPI last year) / CPI last year] × 100
◍ What is the first step in constructing the CPI?.
Answer: Fix the 'basket' of goods that American families are consuming.
◍ What is substitution bias?.
Answer: Consumers switch to cheaper goods
◍ What is the new goods problem?.
Answer: CPI doesn't include new products
