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Question
Statistics
Posted 6 months ago

Which of the following is correct about the basket of goods that makes up a country's consumer price index (CPI)?

Choose 1 answer:
(A) It updates both the prices of the goods and the goods themselves annually

B It consists of the same goods for every country that uses it
(C) It updates the goods in the basket annually, but keeps prices constant

D It updates the prices of the goods in the basket annually, but keeps the goods constant
(E) It holds both the prices of goods and the goods themselves constant year after year
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Answer from Sia
Posted 6 months ago
Solution by Steps
step 1
To address the question about the consumer price index (CPI), we need to understand what CPI represents and how it is constructed. CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services
step 2
The basket of goods and services in the CPI is meant to represent the consumption patterns of a typical urban household. It is updated periodically to reflect changes in consumer habits, but not necessarily annually
step 3
Prices of the goods and services in the basket are collected regularly to reflect the current cost of living
step 4
The correct answer must reflect the periodic update of the basket composition to mirror current consumption patterns and the regular update of prices to reflect current costs
Answer
D
Key Concept
CPI Basket and Price Updates
Explanation
The consumer price index (CPI) basket is updated periodically to reflect changes in consumer habits, while prices are updated more frequently to reflect current costs, but the goods in the basket do not change annually.

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