Question

Which is not true? The Producer Price Index (PPI) includes the cost of workers, but the...

Which is not true? The Producer Price Index (PPI) includes the cost of workers, but the Consumer Price Index (CPI) does not. Each good that is included in the Producer Price Index (PPI) is also included in the Consumer Price Index (CPI), but the CPI contains some additional items as well. The Consumer Price Index (CPI) and the Producer Price Index (PPI) are both measures of "average prices." The Consumer Price Index (CPI) does not include the prices of production inputs, like steel, but the Producer Price Index (PPI) does. The Consumer Price Index (CPI) is a measure of the average price of goods and services that individuals purchase.

2.

Which of the following is most likely to cause the labor demand to shift up and to the right?

Worker confidence about future employment opportunities increases (shifts up and right).

Capital used in the sector falls.

The value of the good sold by the sector falls.

Technology improves for a substitute sector.

The value of the marginal product of labor increases.

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Answer #1

1. False statement is “ Each good that is included in the Producer Price Index (PPI) is also included in the Consumer Price Index (CPI), but the CPI contains some additional items as well.”

PPI measures prices of input costs that Producers pay, whereas CPI measures the price of goods and services that consumers buy

2. Labor demand will be shifted to the right when “capital used in the sector falls”

When less capital is used , the more labor will be demanded to fulfil production requirement giving rise to demand for labor.

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