Which of the following statements is incorrect? a. Inflation is the percentage change in the price level from one period to another. b. PCE (personal consumption expenditure) price index reflects actual out-of-pocket cost, and hence, it takes into account the substitution effects, unlike the CPI. c. Economists prefer to use core CPI (or core PCE), rather than CPI (or PCE), to detect inflation trend, as it excludes foods & energy prices which are highly volatile. d. Housing (such as shelter, fuel & utilities, furnishings) is the CPI component that carries the third largest weight in the CPI index.
Which of the following statements is incorrect? a. Inflation is the percentage change in the price level from one period to another. b. PCE (personal consumption expenditure) price index reflects actual out-of-pocket cost, and hence, it takes into account the substitution effects, unlike the CPI. c. Economists prefer to use core CPI (or core PCE), rather than CPI (or PCE), to detect inflation trend, as it excludes foods & energy prices which are highly volatile. d. Housing (such as shelter, fuel & utilities, furnishings) is the CPI component that carries the third largest weight in the CPI index.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Which of the following statements is incorrect?
a. Inflation is the percentage change in the
b. PCE (personal consumption expenditure) price index reflects actual out-of-pocket cost, and hence, it takes into account the substitution effects, unlike the CPI.
c. Economists prefer to use core CPI (or core PCE), rather than CPI (or PCE), to detect inflation trend, as it excludes foods & energy prices which are highly volatile.
d. Housing (such as shelter, fuel & utilities, furnishings) is the CPI component that carries the third largest weight in the CPI index.
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