Which one of the following is true?
A) Inflation increases the real value of money.
B) In the base year, the value of a price index is 100.
C) The consumer price index measures changes in the average income of consumers.
D) The market basket defined for the consumer price index contains more items than does the market basket defined for the GDP deflator.

Question

Quizplus · Accepted Answer

In the base year, the value of a price index is always set at 100 to serve as a benchmark for measuring price changes over time. Option A is incorrect because inflation decreases the real value of money. Option C is incorrect because the consumer price index measures changes in the price level of goods and services purchased by households. Option D is incorrect because the market basket defined for the GDP deflator includes all goods and services produced in the country, while the market basket defined for the consumer price index only includes goods and services purchased by households.

Which One of the Following Is True