Japan Updates its CPI Basket

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

What does the CPI market basket contain?

Goods and services ______________.

a) bought by average urban consumers, weighted by their share of the consumer budget

b) bought by all consumers, weighted by their share of the consumer budget

c) produced by the average firm

d) produced domestically and bought by average urban consumers

Why is the CPI market basket updated periodically?

The CPI market basket is updated periodically to _____________.

a) reflect changes in household spending patterns

b) remove imported goods

c) reflect changes in what firms produce

d) measure changes in prices

If the CPI basket is not updated, does a shift from formal to casual office wear make the CPI less accurate?

a) Changes in consumer preferences do not affect CPI accuracy.

b) The shift in demand changes clothing prices.

c) Keeping the same basket prevents inaccuracy.

d) The basket uses inaccurate spending weights.

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