Question

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living. True False

Answer 1

Answer:

True

Explanation:

Consumer price index measures the changes in price level of a basket of goods.

If consumer price index falls if means price level has fallen , goods become cheaper and the same amount of money can buy more quantities of goods and services.

Conversely if consumer price index rises, price level has increased, goods and services become more expensive and more amount of money would be needed to maintain the same level of consumption.

CPI is calculated as cost of basket of goods in a given year / cost of basket of goods in a base year

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