Prices Fell in December as Inflation Continues to Moderate

EconEye Admin

3 years ago

Consumer prices decreased by 0.1% in December compared to November. The closely watched inflation gauge also showed that year-over-year prices continued to cool last month, slowing to 6.5%, from 7.1% in November. Stripping out food and energy prices, core CPI came in at 5.7%, down from November’s 6% annual rate.—cnn.com

Answer the following questions to check your understanding of the story.

1) Was the consumer price index (CPI) higher in December 2022 or in November 2022? Was the CPI higher in December 2022 or December 2021?

The CPI was ______________ in December 2022 than in November 2022, and ____________ in December 2022 than in December 2021.

a) higher; lower

b) lower; higher

c) lower; lower

d) higher; higher

Wrong! - Consumer prices decreased in December 2022 compared to November 2022, so was the CPI in December 2022 higher or lower than in November 2022? The inflation rate between December 2022 and December 2021 was positive. Was the CPI higher or lower in December 2022 than in December 2021?

Well Done! - Consumer prices decreased in December 2022 compared to November 2022, so the CPI in December 2022 was lower than in November 2022. But the inflation rate between December 2022 and December 2021 was positive so the CPI in December 2022 was higher than the CPI in December 2021.

2) How did food and energy prices change between December 2021 and December 2022?

Food and energy prices _____________.

a) increased because the annual CPI inflation rate rose by more than the core CPI inflation rate increased

b) might have increased or decreased but we don’t know for sure

c) decreased because the annual core inflation rate fell between November 2022 and December 2022

d) decreased because consumer prices fell in December 2022

Wrong! - What is excluded from the annual core inflation rate? How can we use the annual core inflation rate with the annual CPI inflation rate to determine changes in the prices of food and energy?

Correct! - The annual core inflation rate in December 2022 was 5.7%, and the annual CPI inflation rate in December 2022 was 6.5%. The core inflation rate excludes the prices of food and energy. Because the annual CPI inflation rate exceeds the core inflation rate, it must be the case that the prices of food and energy increased between December 2021 and December 2022.

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