What does the consumer price index (CPI) measure?
A) the change in prices of a set of goods that represent the minimum acceptable standard of living for the nation's consumers
B) the change in the rate of inflation over time
C) the change in weighted average price over time in a "market basket" of goods and services bought by the typical consumer
D) the percentage of income consumers must use to pay for goods relative to their average incomes in the same time period

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) measures the change in the weighted average price of a basket of goods and services that are typically purchased by consumers over time. It provides a gauge of inflation and is used by policymakers to make decisions regarding monetary policy, such as setting interest rates. Choice A is incorrect because the CPI does not necessarily represent the minimum acceptable standard of living for consumers. Choice B is also incorrect as the CPI itself is a measure of inflation. Choice D is incorrect as the CPI does not consider consumer incomes.

What Does the Consumer Price Index (CPI) Measure