Question

One reason economists have begun focusing on the Personal Consumption Expenditure measure for inflation is that the PCE deflator: takes the exchange rate value of the dollar into account. allows for a changing basket of goods. includes the price of assets such as stock portfolios. weights food more because food is a rising percent of expenditures.

Answer 1

allows for a changing basket of goods.

Step-by-step explanation:

Personal consumption expenditure (PCE) basically measures consumer spending on a national level, and consumer spending is by far the largest component of the gross domestic product (around 70% actually). PCE are used to elaborate the PCE price index which is an alternative to the most generally used CPI price index.

The PCE price index is currently the main inflation index used by the Fed, but the CPI elaborated by the Bureau of Labor Statistics is still the most used and well known price index.

The PCE price index divides consumption into durable goods, non-durable goods and services. The main advantage of the PCE over the CPI is that the PCE is adjusted more frequently and therefore, should show a more realistic basket of goods and services than the CPI.

Answer 2

One reason economists have begun focusing on the Personal Consumption Expenditure measure for inflation is that the PCE deflator:

ALLOWS FOR A CHANGING BASKET OF GOODS.

Step-by-step explanation:

Personal Consumption Expenditure can used as means or measure of determining the Consumption of goods and services but durable and non durable by households in an economy.

Personal Consumption Expenditure (PCE) deflator is used to determine the rate of inflation in an economy due to the differences or changes in personal consumption of goods and services by households.

PCE deflator allows for a changing basket of goods thereby making it suitable as a measure of inflation.