Question

The inflation rate measures the percentage change in the price index. True or False

Answer 1

Answer: True

Explanation:

Inflation rate actual measures an increase in the consumer price index (CPI) which is based on average prices of various goods.

The goods which are considered under inflation are based on whether they fall under the prevalent consumption basket in that country.

The index therefore has various goods based on what goods that country consumes the most some goods are responsible for price increase whilst some for price decrease depending on how heavy does each good weigh on the overall consumption basket of that country.

A price index refers to an average price of particular good or services in a particular region at a certain period.