4) Conventional economists define \"inflation (or \"deflation\") as a change in

Question

4) Conventional economists define "inflation (or "deflation") as a change in prevailing price levels. Price levels are measured in a variety of ways, and reported from various sources, including the Bureau of Labor Statistics. These sources will report price levels as indexed values, normalized to some historic price level used as the base. One of these is "Urban All Items"; but when the Federal Reserve evaluates inflation rates, they often use a metric they call "Core" inflation. The index for Core inflation is the same as the All Items index, except that it deletes two important items. What are these two important items that are omitted when Core inflation is measured?

Explanation / Answer

The two important items that are omitted when core inflation is measured are:

1. Food

2. Energy (Eg: oil and gas)

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