Which of the following is a price index that measures changes in the prices of personal consumption expenditures where the relative weights of the items in the index change as consumers substitute out of relatively more expensive items and into relative cheaper items?
A)the consumer price index
B)the price index for personal consumption expenditures
C)the quality price index
D)the GDP deflator

Question

Quizplus · Accepted Answer

The price index for personal consumption expenditures (PCE) is a price index that measures changes in the prices of personal consumption expenditures. The relative weights of the items in the index change as consumers substitute out of relatively more expensive items and into relatively cheaper items, making it a more accurate measure of inflation than the fixed-weight consumer price index. The other options, the consumer price index (A), the quality price index (C), and the GDP deflator (D), do not have weights that change based on consumer substitution.

Which of the Following Is a Price Index That Measures