Between 2012 and early 2019, the average rate of inflation as measured by the core personal consumption
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Between 2012 and early 2019, the average rate of inflation as measured by the core personal consumption expenditures (PCE) price index was 1.6 percent—below the Federal Reserve’s target of 2 percent.
a. Briefly explain why using the consumer price index (CPI) might yield a rate of inflation different from that found using the core PCE price index.
b. Explain how the Federal Reserve’s choice of a price index to measure inflation can affect monetary policy.
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Answer a The Consumer Price Index CPI and the core Personal Consumption Expenditures PCE price index are both measures of inflation but they differ in ...View the full answer
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