Question

1.)The PCE is preferred to the CPI as a measure of inflation because

		the CPI is quarterly while the PCE is monthly
		the PCE does not have the biases created by a fixed basket measure
		the PCE measures prices for all types of goods
		the PCE measures prices for the most important consumer goods

2) Since the Great Recession, inflation rates have rarely been above

		.5%
		1%
		1.5%
		2.5%

3.) Currently, a real GDP growth rate of approximately 5% would be considered

		unusually low
		about average
		fairly high
		unachievable

Answer 1

1. Both PCE and CPI are monthly data thus option A. is incorrect.

PCE as well as CPI measures price of all goods. Option C and D too is incorrect.

Major difference between PCE and CPI calculation is that under CPI it is fixed weight index while PCE is chain weight index.

Option B

2. 2.5%

3. Fairly high.

According to economists a 2% growth rate is considered to be ideal. But if the growth rate is greater than that then it is considered are fairly high.

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