Consumer Price Index (CPI) Quiz 17 Questions and Answers ,100% CORRECT

Consumer Price Index (CPI) Quiz 17 Questions and Answers Consumer Price Index - Correct AnswersA measure of the overall cost of the goods and services bought by a typical consumer Inflation rate - Correct AnswersPercentage change in the price index from the preceding period Producer price index - Correct AnswersA measure of the cost of a basket of goods and services bought by firms Differences between GDP deflator and the CPI - Correct AnswersGDP deflator reflects the prices of all goods and services produced domestically Consumer price index reflects the prices of all goods and services bought by consumers CPI compares the price of a fixed basket of goods and services to the price of the basket in the base year GDP deflator compares the price of currently produced goods and services to the price of the same good and services in the base year Indexation - Correct AnswersThe automatic correction by law or contract of a dollar amount for the effects of inflation Nominal interest rate - Correct AnswersInterest rate that measures the change in dollar amounts Tells you how fast the number of dollars in your back account rises over time Real interest rate - Correct AnswersInterest rate corrected for the effort of inflation Tells you how fast the purchasing power of your bank account rises over time The Bureau of Labor Statistics - Correct AnswersWho determines the CPI? the price deflator and CPI - Correct AnswersWhat are the two ways the BLS determines inflation? Base period, hypothetical basket, sum of prices in hypothetical basket = 100 - Correct AnswersHow does the BLS determine a sub score for the CPI? the percent change of the same index by month - Correct AnswersHow does the CPI determine inflation rates? you need to have the CPI in order to get the real GNP/GDP - Correct AnswersYou need to have the ........ in order to get the real ......... weights problem, composition problem, quality problem, political problem - Correct AnswersWhat are the 4 problems with the CPI? The proportional "weight" each good holds in the index changes overtime and varies among consumers - Correct AnswersWhat is the weights problem with the CPI? Common commodity items change overtime (What goes in and what doesn't?) - Correct AnswersWhat is the composition problem with the CPI? Goods & Services improve overtime due to technology (increased quality/value not accounted for) - Correct AnswersWhat is the quality problem with the CPI? Major methodological revisions lead to a underestimated/biased inflation rate - Correct AnswersWhat is the Political Problem with the CPI?