Question: In the data file USMacro_Monthly, you will find data on two aggregate price series for the United States: the Consumer Price Index (CPI) and the Personal Consumption Expenditures Deflator (PCED). These series are alternative measures of consumer prices in the United States. The CPI prices a basket of goods whose composition is updated every 5-10 years. The PCED uses chain-weighting to price a basket of goods whose composition changes from month to month. Economists have argued that the CPI will overstate inflation because it does not take into account the substitution that occurs when relative prices change. If this substitution bias is important, then average CPI inflation should be systematically higher
