Which statement about the personal consumption expenditures (PCE) price index is TRUE?
A) It does a better job than the CPI in accounting for product substitution.
B) The PCE is an index of the average prices received by domestic producers for their output.
C) It is generally higher than the CPI.
D) Social Security and TIPS bonds use the PCE to adjust the payments they make.

Question

Quizplus · Accepted Answer

The PCE price index accounts for changes in consumer behavior, such as product substitution, more effectively than the Consumer Price Index (CPI). This makes it a more accurate measure of inflation from the perspective of consumers' actual spending patterns.

Which Statement About the Personal Consumption Expenditures (PCE) Price Index