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A purpose of the Core Inflation Index is _______________. Select the correct answer below: to help consumers understand the overall cost of living from month to month to be a gauge from which to make important government policy changes to help companies make decisions about production and hiring to help people determine global trends in the oil market

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Answer:

to be a gauge from which to make important government policy changes.

Explanation:

Inflation can be defined as the persistent general rise in the price of goods and services in an economy at a specific period of time.

Generally, inflation usually causes the value of money to fall and as a result, it imposes more cost on an economy.

Furthermore, when this persistent rise in the price of goods and services in an economy becomes rapid, excessive, unbearable and out of control over a period of time, it is generally referred to as hyperinflation.

Core Inflation Index can be defined as a measure of the change in the price (cost) of goods and services over a specific period of time but excluding the products or items from the energy and food sector. The energy products and food items are excluded because they're transitory i.e having temporary price volatility and as such making their prices change easily.

In Economics, some of the common ways to measure the rate of inflation in a country is through the consumer price index (CPI), gross domestic product deflator (GDP Deflator), personal consumption expenditures price index (PCEPI), employment cost index (ECI), producer price index (PPI), etc.

Hence, a purpose of the Core Inflation Index is to be a gauge from which to make important government policy changes that would have a significant effect or impact on the lives of the citizens of the country.

CII measures the change in the price of goods and services minus the price change of food and energy. It is a tool to make important government policies.

What is Core Inflation Index?

CII is the difference between the change in the price of goods and services and with change in the price of food and energy. The food and energy factor is excluded because they are very volatile in nature.                                  

The purpose of CII is to be a gauge from which to make important government policy changes.  

Therefore, it can be said the above option aptly describes the purpose of CII.

Learn more about Core Inflation Index here:

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