Question

August 2017 September 2017 Total CPI +0.4 +0.5 Core CPI +0.2 +0.1 Total Vs. Core: Core excludes food and energy because they’re too volatile 1)The inflation rate in September 2017, as measured by the percent change in total CPI, was higher/lower than it was in August 2017. Answer: Higher 2)The aggregate price level in September 2017, as measured by the total CPI, was higher/lower than it was in August 2017. Answer: Higher
3)The inflation rate in September 2017, as measured by the percent change in core CPI, was higher/lower than it was in August 2017. Answer: Lower
4)The aggregate price level in September 2017, as measured by the core CPI, was higher/lower than it was in August 2017. Answer: Higher Can Someone Explain how those answers were obtained please.

Answer 1

For the first question compare the increase in total CPI given as a change in percentage terms. It is given that total CPI was increased by 0.4% in August from previous month and it was also increased in September from its value by 0.5%. Hence CPI which measures inflation concludes that the inflation rate in September 2017 was higher than it was in August 2017

Similarly for the second question, the aggregate price level can be seen as a reflection of inflation rate. If inflation is increasing in a month, its must be true that aggregate price level is increasing. Hence the aggregate price level in September 2017 was higher/lower than it was in August 2017. Both these results are based on total CPI which showed an increase from August to September

Now Core CPI has registered a fall because it indicates that Core CPI was increased by 0.2% in August from previous month but it was increased by a lesser % in September from its previous month value by 0.1% only. Hence inflation rate is falling. So the inflation rate in September 2017,using core CPI, was lower than it was in August 2017.

But the same is not true for aggregate price level whose increase is measured by CPI. If CPI increases even though by a lower number, it implies higher price level, but the growth of this price level (called the inflation rate) can be reduced (showing reduecd inflation) which is the case here.