Question

Economists use the market basket of goods and services made up of 80,000 goods and services to generate the cpi. the purpose of this is to

a. regulate the stock exchange.
b. regulate national grain surpluses.
c. determine which products get purchased most often.
d. keep track of the amount of inflation on consumer items.

Answer 1

Economists use a market basket of goods and services to keep track of the amount of inflation on consumer items through the Consumer Price Index (CPI). The CPI is used to measure changes in the overall cost of living and provides valuable information about inflation trends. The correct option is d. keep track of the amount of inflation on consumer items.

Step-by-step explanation:

When the U.S. Bureau of Labor Statistics (BLS) calculates the Consumer Price Index (CPI), the first task is to decide on a market basket of goods and services that is representative of the purchases of the average household. This is done using the Consumer Expenditure Survey, which provides detailed information on the spending habits of about 7,000 households. The purpose of using the market basket of goods and services is to keep track of the amount of inflation on consumer items.

By monitoring the prices of the goods and services in the market basket over time, economists can calculate the CPI to measure changes in the overall cost of living. It helps to determine how much prices have increased or decreased, allowing for comparisons of purchasing power and changes in the value of money.

The CPI is an important indicator for policymakers, businesses, and individuals as it provides valuable information about inflation trends and helps in making economic decisions and policies. The correct option is d. keep track of the amount of inflation on consumer items.