CPI/Problems with consumer price index (CPI) with Verified Answers

CPI/Problems with consumer price index (CPI) with Verified Answers Consumer price index(CPI) - Correct AnswersFor any period, a measure of the cost in that period of a standard basket of goods and services relative ...

CPI/Problems with consumer price index (CPI) with Verified Answers Consumer price index(CPI) - Correct AnswersFor any period, a measure of the cost in that period of a standard basket of goods and services relative to the cost of the same basket of goods and services in a fixed year, is called the base year. Core Rate of Inflation - Correct AnswersThe rate of increase of all prices except energy and food. Cyclical Unemployment - Correct AnswersThe extra unemployment that occurs during periods of recession Deflating - Correct AnswersThe process of dividing a nominal quantity by a price index (such as the CPI) to express the quantity in real terms Deflation - Correct AnswersA situation in which the prices of most goods and services are falling over time so that inflation is negative Discouraged Workers - - Correct AnswersPeople who say they would like to have a job but have not made an effort to find one in the past four weeks. Frictional Unemployment - Correct AnswersThe short-term unemployment associated with the process of matching workers with jobs. Gross Domestic Product (GDP) - Correct AnswersThe market value of the final goods and services produced in a country during a given period. Indexing - Correct AnswersThe practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index. IT prevents the purchasing power of the nominal quantity from being eroded by inflation. Nominal gross domestic product - Correct AnswersA measure of GDP in which the quantities produced are valued at current-year prices; it measures the current dollar value of production Participation rate - Correct AnswersThe percentage of the working-age population in the labor force (that is, the percentage that is either employed or looking for work). Rate of Inflation - Correct AnswersThe annual percentage rate of change in the price level, as measured, for example, by the CPI Real gross domestic product - - Correct AnswersA measure of GDP in which the quantities produced are valued at the prices in a base year rather than at current prices; IT measures the actual physical volume of production. Structural Unemployment - Correct AnswersThe long-term and chronic unemployment that exists even when the economy is producing at a normal rate. Worker Mobility - Correct AnswersThe movement of workers between jobs, firms, and industries. Different rates of inflation for different income earners - Correct AnswersDifferent consumers have different consumption patterns depending on their income levels, and these may differ from what is included in the basket Different rates of inflation depending on regional or cultural factors - Correct AnswersConsumers from different backgrounds have different consumption patterns, and these may differ from what is included in the basket Changes in consumption patterns due to consumer substitutions when relative prices change - Correct AnswersConsumers may switch to cheaper substitutes as prices increase, meaning there is a change in weights of goods in the basket Changes in consumption patterns due to increasing use of discount stores and sales - Correct AnswersConsumers may buy goods and services at prices lower than used in the CPI basket Changes in consumption patterns due to the introduction of new products - Correct AnswersThe CPI basket does not account for new products introduced into the market, as well as older products that become more popular or are withdrawn Changes in product quality - Correct AnswersThe CPI basket does not account for quality changes over time International comparisons - Correct AnswersThe CPIs of different countries differ from each other with respect to the types of goods and services included in the basket, the weights used and the methods of calculation. This limits the comparability of CPIs and inflation rates from country to country Comparability over time - Correct AnswersSince baskets are changed every few years, long run comparisons cannot be made