The producer price index
A) is frequently cited as a source of information for future consumer price inflation.
B) is a measure of prices charged by producers at various stages of production.
C) is an excellent source of information about prices of crude raw materials and intermediate goods that are not explicitly included in the CPI.
D) is diminished in importance somewhat by the ambiguity of weights to be used in making the required definitional computation.
E) all of the above.

Question

Quizplus · Accepted Answer

The producer price index (PPI) is indeed often cited as a predictor of future consumer price inflation because it measures price changes from the perspective of the seller and can indicate trends that might later affect consumer prices. It encompasses prices at various stages of production, not just final goods, making it a valuable source for understanding price changes in crude raw materials and intermediate goods that the Consumer Price Index (CPI) might not fully capture. The complexity and ambiguity in choosing the appropriate weights for the various goods and services in the PPI can affect its accuracy and interpretation, but this does not significantly diminish its importance as an economic indicator.

The Producer Price Index