Q6. Consider the Wall Street Journal article regarding the CPI vs the PCE price
ID: 1162000 • Letter: Q
Question
Q6.
Consider the Wall Street Journal article regarding the CPI vs the PCE price index. What is not a primary difference between the two price measures mentioned in the article?
The CPI is based on consumer survey data, whereas the PCE is based on retail sales data.
The CPI includes only goods purchased directly by consumers, whereas the PCE includes all consumer goods (whether purchased by themselves or a third party).
The CPI is the preferred measure of prices in the entire economy, whereas PCE provides a better idea of how price changes affect consumers wallets.
The CPI uses fixed weights, whereas the PCE uses chained weighting which allows it to better measure the introduction of new goods.
Q10.
Suppose there is an influx of sellers into the market for cellphones. At the same time, income goes up for the consumers of cellphones. In response to these shocks, what happens to the equilibrium price and equilibrium quantity?
The equilibrium price rises, but the effect on the equilibrium quantity is ambiguous.
The equilibrium price falls, but the effect on the equilibrium quantity is ambiguous.
The effect on the equilibrium price is ambiguous, but the equilibrium quantity goes up.
The effect on the equilibrium price is ambiguous, but the equilibrium quantity goes down.
a.The CPI is based on consumer survey data, whereas the PCE is based on retail sales data.
b.The CPI includes only goods purchased directly by consumers, whereas the PCE includes all consumer goods (whether purchased by themselves or a third party).
c.The CPI is the preferred measure of prices in the entire economy, whereas PCE provides a better idea of how price changes affect consumers wallets.
d.The CPI uses fixed weights, whereas the PCE uses chained weighting which allows it to better measure the introduction of new goods.
Explanation / Answer
Q 6
c
This the conclusion of the articles, whereas, the other three options are differences between CPI and PCE.
Q.10 C
If both supply and demand increase, the equilibrium quantity will increase but the effect on price cannot be determined. The increase in price depends upon the shift in the demand and supply curves.
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