CPI PRACTICE SOLUTION SET 2026
COMPLETE QUESTIONS AND ANSWERS
GUARANTEED TO PASS
●● What does 'sticky' inflation mean?.
Answer: It refers to inflation that does not decrease quickly, indicating
persistent price increases.
●● Why is the Fed cautious about cutting interest rates?.
Answer: Due to sticky inflation readings, making it less likely to cut
rates soon.
●● What is the primary job of the Fed according to Chicago Fed's
Goolsbee?.
Answer: To lower inflation.
●● What is the Consumer Price Index (CPI)?.
Answer: A measure of the overall level of prices and the overall cost of
goods and services bought by a typical consumer.
●● How is the CPI computed?.
Answer: It is computed and reported every month by the Bureau of
Labor Statistics.
, ●● What is the first step in calculating CPI?.
Answer: Fix the basket of goods and services to reflect a representative
consumer's spending habits.
●● How do you compute the cost of a basket of goods?.
Answer: By multiplying the quantity of each item by its price and
summing the total.
●● What formula is used to compute the CPI?.
Answer: CPI = (Price of basket in current year / Price of basket in base
year) × 100.
●● How is the inflation rate calculated?.
Answer: Inflation rate = (CPI in year 2 - CPI in year 1) / CPI in year 1 ×
100.
●● What does Core CPI measure?.
Answer: The overall cost of consumer goods and services excluding
food and energy.
●● What is a limitation of Core CPI?.
COMPLETE QUESTIONS AND ANSWERS
GUARANTEED TO PASS
●● What does 'sticky' inflation mean?.
Answer: It refers to inflation that does not decrease quickly, indicating
persistent price increases.
●● Why is the Fed cautious about cutting interest rates?.
Answer: Due to sticky inflation readings, making it less likely to cut
rates soon.
●● What is the primary job of the Fed according to Chicago Fed's
Goolsbee?.
Answer: To lower inflation.
●● What is the Consumer Price Index (CPI)?.
Answer: A measure of the overall level of prices and the overall cost of
goods and services bought by a typical consumer.
●● How is the CPI computed?.
Answer: It is computed and reported every month by the Bureau of
Labor Statistics.
, ●● What is the first step in calculating CPI?.
Answer: Fix the basket of goods and services to reflect a representative
consumer's spending habits.
●● How do you compute the cost of a basket of goods?.
Answer: By multiplying the quantity of each item by its price and
summing the total.
●● What formula is used to compute the CPI?.
Answer: CPI = (Price of basket in current year / Price of basket in base
year) × 100.
●● How is the inflation rate calculated?.
Answer: Inflation rate = (CPI in year 2 - CPI in year 1) / CPI in year 1 ×
100.
●● What does Core CPI measure?.
Answer: The overall cost of consumer goods and services excluding
food and energy.
●● What is a limitation of Core CPI?.
