Question

why. If the CPI rises at 5% per year, then every individual in the country needs exactly a 5% increase in their income for their standard of living to remain constant.

Answer 1

The given statement " If the CPI rises at 5% per year, then every individual in the country needs exactly a 5% increase in their income for their standard of living to remain constant" is FALSE

Explanation:

The CPI is also considered an indicator of cost of living, but varies from a full calculation of cost-of-living in important ways. A living-cost index will calculate adjustments over time to the value spent by households in order to achieve a given degree of utility or living standard.

Changes in the customer buying habits are taken into account in the new BLS process. When there is no improvement in customer behaviour, the simplistic analysis given would suggest that the CPI measured is 10%. It is the same outcome as the approach Williams uses with set baskets.

If buyers adjust their buying habits and replace FM absolutely with TS, however, the CPI is 0 percent. When buyers minimize their FM buy-out by 50% and then buy TS, the CPI computed by the BLS would be 5%.