In the UK, the Consumer Prices Index (CPI) is used as a key measure of inflation. Which of the following statements correctly describes how the 'basket of goods and services' and its associated weights are updated?
The basket of goods is updated annually, but the weights are kept constant for five-year intervals to prevent short-term consumption shifts from distorting the trend.
The weights are updated annually using national income accounts, but the items in the basket are fixed for a ten-year period to maintain consistent comparisons.
Both the composition of the basket and the expenditure weights are updated annually, with the weights derived primarily from the Living Costs and Food Survey.
The basket and weights are updated monthly using electronic point-of-sale (EPOS) transaction data from the UK's major supermarkets.
