Question

If housing prices increase by 25 percent and the price of all other goods decreases by 22 percent, then Group of answer choices

a) the consumer price index (CPI) would only be affected in a small way because it includes about 8,000 goods and housing is only one of the 8,000.

b) the consumer price index (CPI) would definitely fall during the year in question because housing prices do not constitute the majority of the CPI.

c) the consumer price index (CPI) would definitely rise during the year in question because housing prices do constitute the majority of the CPI.

d) because housing spending is considered an investment, the producer price index (PPI) but not the consumer price index (CPI) would be the only price index affected by the change.

e) the consumer price index (CPI) would rise by about 1.5 percent because housing constitutes about half of the market basket in the CPI.

Answer 1

ANSWER :: (c) the consumer price index (CPI) would definitely rise during the year in question because housing prices do constitute the majority of the CPI.

=> Explanation :

As We Show that in the market Housing Price Increase By 25% And On The Other Prices Of Goods Decrease By 22% Which is 2% Less Than The Increase In the Housing Prices. So we assume that housing has a major part of the CPI and increase 2% in the total CPI. So The Consumer Price Index Definitely Rise During Year In that question Because Housing Price Do Constitute the majority Of the CPI. Housing consumer Basket Is Higher Than The All Other Goods In The CPI Index So The Consumer Price Index Definitely Increase Because Of The Housing Prices