It is currently 15 Dec 2017, 19:38

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Close

Request Expert Reply

Confirm Cancel

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

The Consumer Price Index(CPI) is a statistic that measures

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
GMAT Club Legend
GMAT Club Legend
avatar
Joined: 15 Dec 2003
Posts: 4284

Kudos [?]: 544 [0], given: 0

The Consumer Price Index(CPI) is a statistic that measures [#permalink]

Show Tags

New post 12 Jun 2004, 20:39
00:00
A
B
C
D
E

Difficulty:

(N/A)

Question Stats:

100% (00:00) correct 0% (00:00) wrong based on 2 sessions

HideShow timer Statistics

The Consumer Price Index(CPI) is a statistic that measures changes in prices of goods and services purchased by consumers. It is based on a "basked of goods and services" divided into seven categories such as housing, food, and transportation with each category weighted according to its relative impact on a typical budget. Although the CPI is a useful measure of inflation, consumers themselves almost always imagine that prices are rising faster than this statistical measure.

Which of the following would help to explain the phenomenon described above?
A) the typical consumer purchases large ticket items such as a house or a car so infrequently that even given a low rate of inflation, the price of the new purchase will be noticeably higher than that of the previous one
B) in recent years, advances in technology have caused the price of electronics such as computers and stereo equipment to decline even as new products are introduced that have more extensive capabilities
C) because of long-term pressures in the health-care sector such as the push for higher wages for the lowest paid health-care workers, the cost of medical care has risen faster than the CPI
D) the CPI is compiled by the Bureau of Labor Statistics and is intended primarily as a measure of the effect of rising prices on a typical urban family
E) the prices paid for commodities such as gasoline that depend upon international market conditions are usually more volatile than those determined largely by domestic factors and tend to rise and fall sharply in the short run
_________________

Best Regards,

Paul

Kudos [?]: 544 [0], given: 0

SVP
SVP
User avatar
Joined: 30 Oct 2003
Posts: 1788

Kudos [?]: 114 [0], given: 0

Location: NewJersey USA
 [#permalink]

Show Tags

New post 12 Jun 2004, 21:11
I liked (A). It talks about perception of a typical consumer.

Kudos [?]: 114 [0], given: 0

Director
Director
User avatar
Joined: 05 May 2004
Posts: 574

Kudos [?]: 68 [0], given: 0

Location: San Jose, CA
Re: CR: CPI [#permalink]

Show Tags

New post 13 Jun 2004, 00:27
I will go with A
The CPI is a function of large and small ticket items and a typical cutomer normally buys small ticket items most of the time. Hence, even though there might be inflation in small ticket items - the overall CPI might be fathomed by the wts of large ticket items

Kudos [?]: 68 [0], given: 0

Director
Director
User avatar
Joined: 01 Feb 2003
Posts: 838

Kudos [?]: 131 [0], given: 0

Location: Hyderabad
 [#permalink]

Show Tags

New post 13 Jun 2004, 01:10
Agree with (A)

the rest of the options are too specific

Kudos [?]: 131 [0], given: 0

Manager
Manager
User avatar
Joined: 01 Jun 2004
Posts: 184

Kudos [?]: 7 [0], given: 0

Location: Kiev, Ukraine
 [#permalink]

Show Tags

New post 13 Jun 2004, 02:21
I also agree with A.

The phenomenon at hand is the discrepancy between the objectivity of the CPI and consumer's perceptions of prices rising more quicly than reflected by the CPI.

CPI reflects inflation based on weighing of large & small items in attempting objectivity.

Consumers, being subjective, tend to care about high prices only when they are really noticeable, when purchasing a house, a car, etc. It's likely they are not going to notice a decrease/increase in price of toilet paper!
_________________

Searching for an answer...

Kudos [?]: 7 [0], given: 0

GMAT Club Legend
GMAT Club Legend
avatar
Joined: 15 Dec 2003
Posts: 4284

Kudos [?]: 544 [0], given: 0

 [#permalink]

Show Tags

New post 13 Jun 2004, 21:03
OA is A
_________________

Best Regards,

Paul

Kudos [?]: 544 [0], given: 0

  [#permalink] 13 Jun 2004, 21:03
Display posts from previous: Sort by

The Consumer Price Index(CPI) is a statistic that measures

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  

Moderators: GMATNinjaTwo, GMATNinja



cron

GMAT Club MBA Forum Home| About| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.