The Fed also uses (sometimes prefers) the PCE because it changes the basket items much more frequently than the CPI. True or False?
Understand the Problem
The question is asking whether the statement about the Fed's preference for the PCE over the CPI due to the frequency of basket item changes is true or false.
Answer
True
The final answer is True.
Answer for screen readers
The final answer is True.
More Information
The Fed prefers the PCE because it changes the basket of items more frequently, allowing it to reflect changes in consumer spending habits more promptly than the CPI.
Sources
- What is the Fed's preferred inflation measure? - economist.com
- Why the PCE is the Federal Reserve's preferred measure of inflation - marketplace.org
- Crosswalk Talk: What's the difference between the PCE and the CPI? - whitehouse.gov
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