What is the main difference between headline inflation and core inflation?
A. Headline inflation is higher than core inflation
B. Core inflation excludes food and energy prices
C. Core inflation is used by stores
D. Headline inflation only applies to producers
Answer (2)
The correct answer is B. Core inflation excludes food and energy pricesHeadline inflation measures the total inflation in the economy, including all items such as food and energy.Core inflation excludes food and energy prices because they tend to be more volatile and can distort the overall inflation trend.This helps policymakers and economists get a clearer picture of long-term inflation trends.
The correct answer is letter B. Core inflation excludes food and energy pricesHeadline inflation includes all changes in the prices of goods and services—including volatile prices like food and fuel. On the other hand, core inflation removes food and energy from the calculation because these prices can change a lot due to things like typhoons or oil price changes abroad.For example, if there’s a typhoon in Luzon and vegetable prices shoot up, headline inflation would rise. But core inflation might stay the same, since it doesn't count that price increase. Policymakers use core inflation for decision-making because it shows the long-term trend without being affected by temporary changes.
