CA Foundation · Quantitative Aptitude · Index Numbers
Which statement about the Consumer Price Index (cost of living index) is correct?
The Consumer Price Index measures the average change over time in retail prices of a fixed basket of goods and services consumed by a specific class of consumers. It is not about wholesale prices or production volume, and weights matter.
- AIt measures the average change in retail prices of a fixed basket of goods and services consumed by a particular class of peopleCorrect
- BIt measures changes in wholesale prices of raw materials only
- CIt measures changes in the volume of industrial production
- DIt is unaffected by the weights assigned to items
Explanation
A CPI tracks retail prices of a fixed basket consumed by a specified group. Wholesale price movements are covered by the wholesale price index, and production volumes by the index of industrial production. The weights strongly affect a CPI.
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