i. Besides measuring change in the prices of goods and services, the consumer price indexes have a number of other applications. The CPI is used to determine real disposable personal income, deflate sales or other series, find the purchasing power of the dollar and establish cost of living increases.
Ii) The concept of real income is sometimes called deflated income or income expressed in constant dollars and the CPI is called the deflator.
Iii) To deflate sales, the actual sales are multiplied by the wholesale price index and the result multiplied by 100.
A) (i), (ii) and (iii) are all correct statements
B) (i) and (ii) are correct statements, but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) All statements are false

Question

Quizplus · Accepted Answer

Statement (i) and (ii) are correct as they accurately describe the applications of the CPI and the concept of real income. Statement (iii) is incorrect because to deflate sales, the actual sales are divided by the price index, not multiplied.

I Besides Measuring Change in the Prices of Goods and Services