Which one of the following statements is true of the Consumer Price Index? A. It does not take into account the price of used go
ods. B. It measures changes in prices in a fixed basket of goods. C. It does not take account of the price of imported goods and services. D. It understates the true rate of inflation
The answer is B. It measures changes in prices in a fixed basket of goods.
Explanation:
The Consumer Price Index is used to measure whether the prices when up or down. It takes a group {or a basket) of goods and services that is deemed representative. It covers things like food, transportation, clothing. It looks at price changes for each item and average the total to give you an inflation rate. It is calculated monthly, quarterly or yearly.
