CPI THIRD (3RD) EDITION
CERTIFICATION SCRIPT 2026
QUESTIONS WITH SOLUTIONS
GRADED A+
◍ What is inflation?.
Answer: The growth in the overall level of prices in an economy.
◍ What is hyperinflation?.
Answer: An extremely high rate of inflation.
◍ What does CPI stand for?.
Answer: Consumer Price Index
◍ What is the primary definition of the CPI?.
Answer: A measure of the overall cost of the goods and services bought by a
typical consumer
◍ Which organization computes and reports the CPI?.
Answer: The Bureau of Labor Statistics (BLS)
◍ What is the first step in calculating the CPI?.
Answer: Survey consumers to determine a fixed basket of goods and
services
◍ What is deflation?.
Answer: Occurs when overall prices fall.
◍ What is the second step in calculating the CPI?.
Answer: Find the prices of each good and service in the basket at each point
in time
◍ What does the GDP deflator measure?.
, Answer: The changes in prices for all goods and services produced in an
economy.
◍ How is the GDP deflator calculated?.
Answer: GDP deflator = (Nominal GDP / Real GDP) * 100.
◍ What is the Consumer Price Index (CPI)?.
Answer: A measure of the price level based on the consumption pattern of a
typical consumer.
◍ Who calculates the CPI?.
Answer: The Bureau of Labor Statistics (BLS).
◍ What is a common issue with CPI accuracy?.
Answer: CPI may overstate true inflation due to substitution bias and
changes in quality.
◍ What is the third step in calculating the CPI?.
Answer: Compute the cost of the basket of goods for each year
◍ What is substitution bias?.
Answer: When consumers switch to cheaper alternatives as prices rise,
leading to an exaggerated CPI.
◍ What are shoe-leather costs?.
Answer: Resources wasted when people change behavior to avoid holding
money due to inflation.
◍ What is the fourth step in calculating the CPI?.
Answer: Choose a base year and compute the CPI for each year
◍ What is money illusion?.
Answer: The tendency to misinterpret nominal wage changes as real
changes in purchasing power.
◍ What are menu costs?.
Answer: The costs associated with changing prices, such as reprinting
menus.
CERTIFICATION SCRIPT 2026
QUESTIONS WITH SOLUTIONS
GRADED A+
◍ What is inflation?.
Answer: The growth in the overall level of prices in an economy.
◍ What is hyperinflation?.
Answer: An extremely high rate of inflation.
◍ What does CPI stand for?.
Answer: Consumer Price Index
◍ What is the primary definition of the CPI?.
Answer: A measure of the overall cost of the goods and services bought by a
typical consumer
◍ Which organization computes and reports the CPI?.
Answer: The Bureau of Labor Statistics (BLS)
◍ What is the first step in calculating the CPI?.
Answer: Survey consumers to determine a fixed basket of goods and
services
◍ What is deflation?.
Answer: Occurs when overall prices fall.
◍ What is the second step in calculating the CPI?.
Answer: Find the prices of each good and service in the basket at each point
in time
◍ What does the GDP deflator measure?.
, Answer: The changes in prices for all goods and services produced in an
economy.
◍ How is the GDP deflator calculated?.
Answer: GDP deflator = (Nominal GDP / Real GDP) * 100.
◍ What is the Consumer Price Index (CPI)?.
Answer: A measure of the price level based on the consumption pattern of a
typical consumer.
◍ Who calculates the CPI?.
Answer: The Bureau of Labor Statistics (BLS).
◍ What is a common issue with CPI accuracy?.
Answer: CPI may overstate true inflation due to substitution bias and
changes in quality.
◍ What is the third step in calculating the CPI?.
Answer: Compute the cost of the basket of goods for each year
◍ What is substitution bias?.
Answer: When consumers switch to cheaper alternatives as prices rise,
leading to an exaggerated CPI.
◍ What are shoe-leather costs?.
Answer: Resources wasted when people change behavior to avoid holding
money due to inflation.
◍ What is the fourth step in calculating the CPI?.
Answer: Choose a base year and compute the CPI for each year
◍ What is money illusion?.
Answer: The tendency to misinterpret nominal wage changes as real
changes in purchasing power.
◍ What are menu costs?.
Answer: The costs associated with changing prices, such as reprinting
menus.
