To compute the real income of a household,the index that should be used is the
A)Producer Price Index (PPI).
B)Consumer Price Index (CPI).
C)GDP deflator.
D)Cost of Living Adjustment (COLA).

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of goods and services. It is commonly used to measure inflation and to adjust income for changes in purchasing power. Therefore, to compute the real income of a household, the CPI is the best index to use.

To Compute the Real Income of a Household,the Index That