Inflation and Price Indices

What is inflation?

• The decrease in the general level of prices.

• The increase in the general level of prices.

• The stability of prices over time.

• The fluctuation of prices in a specific sector.

Which index measures the average change in prices paid by consumers for a basket of goods and services over time?

• Retail Price Index (RPI)

• Producer Price Index (PPI)

• Consumer Price Index (CPI)

• Wholesale Price Index (WPI)

The Consumer Price Index (CPI) includes:

• Only goods.

• Only services.

• Both goods and services.

• Neither goods nor services.

What is the formula for calculating the Consumer Price Index (CPI)?

• CPI = (Current Year Price / Base Year Price) * 100

• CPI = (Base Year Price / Current Year Price) * 100

• CPI = (Current Year Quantity / Base Year Quantity) * 100

• CPI = (Base Year Quantity / Current Year Quantity) * 100

How does the Retail Price Index (RPI) differ from the Consumer Price Index (CPI)?

• RPI includes a broader range of items, including housing costs.

• RPI focuses only on goods.

• CPI is used for wholesale pricing.

• CPI measures producer price changes.

Which of the following is a component used to calculate the Consumer Price Index (CPI)?

• Stock prices

• Unemployment rates

• A basket of goods and services

• Exchange rates

The Retail Price Index (RPI) includes which of the following in its calculation?

• Mortgage interest

• Producer goods

• Wholesale prices

• Corporate profits

Why is the base year important in inflation indices calculations?

• It represents the year with the highest inflation.

• It serves as a reference point for measuring price changes.

• It is the year with the lowest inflation.

• It has no significance in inflation calculations.

If the Consumer Price Index (CPI) increases from 150 to 160, what does it indicate?

• Deflation

• Stagnation

• Inflation

• No change in prices

What does an RPI value above 100% imply?

• Inflation

• Deflation

• Stable prices

• No impact on prices