Question

Choose the statement about the Consumer Price Index that is incorrect.

A.The CPI is measured by the Bureau of Labor Statistics.
B.The CPI is calculated monthly.
C.The CPI is defined to equal 1.00 for a period called the reference base period.
D.The CPI is a measure of the average of the prices paid by urban consumers for a fixed basket of consumer goods and services.

Answer 1

The incorrect statement about the CPI is that it is defined to equal 1.00 for the base period; it is actually defined to equal 100 for the base period. The CPI is calculated monthly by the Bureau of Labor Statistics and reflects changes in the cost of living for urban consumers.

Step-by-step explanation:

The statement about the Consumer Price Index (CPI) that is incorrect is: C. The CPI is defined to equal 1.00 for a period called the reference base period. In actuality, the CPI uses a reference base period; however, it is set to 100 for that period, not 1.00. This index measures the average price changes over time of a fixed basket of goods and services purchased by urban consumers.

The Bureau of Labor Statistics calculates the CPI on a monthly basis, and while it represents the purchases of an average family, it is intended to reflect changes in the cost of living, which is conceptually different from just the change in the total cost of goods and services due to potential changes in consumer satisfaction or utility.