Exploring Price Indices and Inflation Costs

What is inflation primarily characterized by?

• Decrease in average prices

• Increase in average prices

• Stability in financial markets

• Decrease in consumer demand

What does CPI stand for?

• Costly Price Indicator

• Consumer Product Inflation

• Cost Price Increase

• Consumer Price Index

Which year is used as the base year in the CPI calculation example?

• 2022

• 2000

• 2012

• 1999

What does a CPI of 100 typically indicate?

• High inflation rate

• Economic recession

• Decrease in market prices

• Base year for comparison

How is the inflation rate calculated between two years?

• Old CPI - New CPI / New CPI x 100

• New CPI - Old CPI x Old CPI / 100

• New CPI + Old CPI / Old CPI x 100

• New CPI - Old CPI / Old CPI x 100

What bias occurs when consumers switch to cheaper alternatives due to price increases?

• Market basket bias

• New products bias

• Substitution bias

• Quality change bias

Which of the following is NOT a problem associated with CPI?

• Quality change bias

• New products bias

• Exchange rate bias

• Substitution bias

What is the impact of inflation on the real value of wages?

• Fluctuates unpredictably

• Stabilizes

• Decreases

• Increases

Who benefits from unexpected inflation?

• Banks

• Government tax departments

• Savers

• Borrowers

What does the real value of money represent?

• Nominal value adjusted for inflation

• The face value of currency

• Government-backed value

• Bank issued value