i. An index is a convenient way of comparing changes for different variables, i.e., average income and food prices. ii. The concept of real income is sometimes called deflated income.
iii. Purchasing power of the dollar is determined by finding the inverse of the CPI.
A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question

Quizplus · Accepted Answer

All statements are correct. Indexes are indeed used to compare changes in variables such as income and prices. Real income, adjusted for inflation, is often referred to as deflated income. The purchasing power of the dollar can be determined by taking the inverse of the Consumer Price Index (CPI), which measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

I an Index Is a Convenient Way of Comparing Changes