The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

a.

True

b.

False

Question

The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

a.

True

b.

False

BlackTom AI · Accepted Answer

The question presents a statement about the producer price index (PPI) and asks whether it is true or false.
Option a: True. The statement correctly claims that the PPI measures the cost of a basket of goods and services bought by firms rather than by consumers. In macroeconomics, the PPI tracks prices received by domestic producers for their output, which includes inputs to production and intermediate goods, rather than the prices paid by final consumers. This distinguishes it from the consumer price index (CPI), which focuses on households and consumer purchases.
Option b: False. This would be incorrect because it contradicts the established definition of the PPI. If someone selected this, they would be misattributing who the basket targets (consumers instead of producers) or misunderstanding the scope of the index. The PPI is not a measure of consumer prices; it is a measure from the perspective of producers.
In summary, the statement aligns with the standard definition of the PPI, making option a the correct interpretation and option b an inaccurate one.

LA-ECON-1101-813-14402-202520 Chapter 25

The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers. a. True b. False

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