Step-by-step explanation:
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a basket of goods and services. The CPI is used as a gauge of inflation, which is the rate at which the general level of prices for goods and services is rising, and the purchasing power of currency is falling.
The CPI is calculated by taking a fixed basket of goods and services that are commonly purchased by households, and tracking the prices of these items over time. The CPI reflects the change in the cost of living for consumers, and is often used as a reference point for wage increases, social security benefits, and other economic indicators.
In general, as the CPI increases, inflation is said to be rising, because it indicates that the prices of goods and services are increasing. Conversely, if the CPI decreases, it is an indication that inflation is decreasing, which means that prices are falling. The Federal Reserve and other policymakers use the CPI and other inflation measures to guide decisions about monetary policy, including setting interest rates and adjusting the money supply, in order to keep inflation within an acceptable range.