What basket of goods is used to construct the CPI?
A) a random sample of all goods and services produced in the economy
B) the goods and services that are typically bought by consumers as determined by government surveys
C) only food, clothing, transportation, entertainment, and education
D) the least expensive and the most expensive goods and services in each major category of consumer expenditures

Question

Quizplus · Accepted Answer

The CPI basket of goods is determined by government surveys that look at the goods and services typically bought by consumers, including food and beverages, housing, apparel, transportation, medical care, recreation, education, communication, and other goods and services. Choice A is incorrect because a random sample of all goods and services produced in the economy is impractical, and it would make it difficult to determine a representative basket of goods. Choice C is incorrect because the CPI includes more than just food, clothing, transportation, entertainment, and education. Choice D is incorrect because the CPI calculates the price changes for all items in the basket using a weighted average, so including only the least or most expensive items in each category would not be representative of consumer expenditures.

What Basket of Goods Is Used to Construct the CPI