Inflation can be measured by the:
A) absolute change in the CPI
B) percentage change in the CPI
C) absolute change in the GDP deflator
D) percentage change in the price of oil

Question

Inflation can be measured by the: 
A) absolute change in the CPI
B) percentage change in the CPI
C) absolute change in the GDP deflator
D) percentage change in the price of oil

Quizplus · Accepted Answer

Inflation is typically measured by the percentage change in the Consumer Price Index (CPI), which tracks the prices of a basket of goods and services commonly purchased by households. By comparing the CPI over time, economists can determine whether prices on average have increased or decreased. Choice A (absolute change in the CPI) could be used to measure inflation, but it would not provide as clear a picture of the overall price level as the percentage change. Choice C (absolute change in the GDP deflator) is a measure of overall inflation but is less commonly used than the CPI. Choice D (percentage change in the price of oil) is not a direct measure of inflation, but changes in oil prices can have an impact on overall prices of goods and services.

Inflation Can Be Measured by The