Question

Suppose that in 2010, the producer price index increases by 1.5 percent. as a result, economists most likely will predict that?

Answer 1

Suppose in 2010, the producer price index increases by 1.5 percent. As a result, the economists are most likely to predict that the consumer price index will increase in the future.

The producer price index is used in order to measure inflation from the perspective of costs to industry. Thus, the producer price index measures the cost of a group of goods and services which are purchased by firms.

Whereas the consumer price index refers to an average of the prices received by producers of goods and services at all the stages of the production process. Thus, when the producer price index increases by 1.5 percent, this is the indication that consumer price index will increase in the future.

Hence, higher producer prices means that consumers will pay more when they buy.

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