Question

The Consumer Price Index (CPI) is best used to determine

Answer 1

The answer is "B) the rate of inflation".

Inflation alludes to a general increment in the Consumer Price Index (CPI), which is a weighted normal of costs for various products. The arrangement of products that make up the record relies upon which are viewed as illustrative of a typical utilization crate. Therefore, contingent upon the nation and the utilization propensities for most of the populace, the file will include diverse merchandise. A few merchandise may record a drop in costs, though others may build, along these lines the general estimation of the CPI will rely upon the heaviness of every one of the products as for the entire bin. Yearly expansion, alludes to the percent change of the CPI contrasted with that same month of the earlier year.

Answer 2

Option (B) is correct.

The consumer price index is best used to determine the rate of inflation.

Further Explanation:

Consumer Price Index: Consumer Price Index is a measurement that analyzes the price of various goods and services basket over the years to conclude the change in the price of the goods and services over the years.

CPI is used for determining inflation. All the identical goods and services are divided into baskets, and then the weighted average price of the basket is compared to the prior year’s weighted average price. It measures the change in the price. Inflation is the increase in the price of goods over the years. The comparison of the prices of several years would be helpful for determining the inflation rate for the current year.

Thus, the Consumer Price Index (CPI) is the best used for determining the rate of inflation.

Justification for the correct and incorrect option:

A.

The Dow Jones Index: This is an incorrect option.

The Dow Jones Index is a stock market index. It deals with the value of the listed stocks.

B.

The rate of inflation: This is the correct option.

Consumer Price Index is used for determining the change in the price of the goods and service over the period.

C.

The unemployment rate: This is an incorrect option.

The unemployment rate is the rate of unemployed citizens in an economy.

D.

Currency exchange rates: This is the incorrect option.

The currency exchange rate is the rate at which two currencies are exchanged with each other.

Learn more:

1. Learn more about the demand and supply

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2. Learn more about the size of the economic pie

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3. Learn more about the economy of Iceland

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Answer details:

Grade: Middle School

Subject: Economics

Chapter: Inflation

Keywords: CPI, Consumer Price Index, determine, Dow Jones Index, rate of inflation, unemployment rate, currency exchange rates, goods and services, bucket, change in price, prior year, previous year, current year.