Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation,
A) provides a real, rather than a nominal, rate of inflation.
B) gives a better measure of ongoing, sustained price changes.
C) is more consistent with measures of inflation used in other countries.
D) fluctuates more than measures of inflation that include food and energy prices.

Question

Quizplus · Accepted Answer

Excluding food and energy prices from the market basket gives a better measure of ongoing, sustained price changes. Food and energy prices can be volatile and subject to seasonal factors, which can distort inflation measurements. By excluding these prices, core inflation provides a clearer picture of underlying inflation trends.

Measuring the Rate of Inflation Using a Market Basket That