The Consumer Price Index is:
A) A measure of changes in the relative prices of significant consumer goods.
B) A measure of changes in the price of all goods and services.
C) A measure of changes in the average price of consumer goods and services.
D) Used to determine if the economy is functioning at full employment.

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) is a measure of changes in the average price of consumer goods and services. It measures the price changes of a basket of goods and services that are commonly consumed by households. It is a commonly used indicator of inflation in an economy. Option A is incorrect as the CPI measures changes in the average price, not just the relative prices of significant consumer goods. Option B is incorrect as the CPI only measures changes in the price of consumer goods and services, not all goods and services. Option D is incorrect as the CPI is not used to determine full employment.

The Consumer Price Index Is