Which of the following correctly shows the steps needed to calculate the inflation rate?
A)Find the total value of the basket of goods and services, assess quality changes from one period to the next, and measure the inflation rate.
B)Tally up the cost of the basket of goods and services, subtract the value of goods and services that are no longer counted in the basket, and then calculate the inflation rate.
C)Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate.
D)Collect prices from the stores where people shop, assess the substitution that people make from low inflation to high inflation products, and calculate the difference in the prices that people pay.

Question

Quizplus · Accepted Answer

C is correct because it outlines the process of determining the inflation rate by identifying a basket of goods and services that represents typical consumer purchases, collecting current prices for these items, and then calculating the rate of price changes over time. This method reflects the Consumer Price Index (CPI) approach, which is a common way to measure inflation.

Which of the Following Correctly Shows the Steps Needed to Calculate