Which of the following best explains why the chained consumer price index generally results in a lower rate of inflation than the regular consumer price index?
A) The chained index is based on a comprehensive bundle of goods and services, while the regular CPI considers only changes in the prices of food and energy.
B) The chained index makes allowance each month for shifts away from goods that have become relatively more expensive; the regular CPI does not adjust for this factor.
C) The chained consumer price index considers the impact of both rising and falling prices, whereas the regular consumer price index considers only the impact of goods and services with rising prices during the period.
D) The chained consumer price index considers only the prices of goods and services purchased by households, whereas the regular CPI also includes the price changes of investment assets such as stocks and real estate.

Question

Quizplus · Accepted Answer

The chained consumer price index adjusts for shifts in spending patterns that occur in response to price changes, resulting in a lower inflation rate compared to the regular CPI which does not consider these shifts.

Which of the Following Best Explains Why the Chained Consumer