Final answer:
CPI is not about total output, but about the price changes for a fixed basket of goods and services representing the average family's purchases over time, and is used as an inflation indicator.
Therefore, this statement is false.
Step-by-step explanation:
The statement that the Consumer Price Index (CPI) measures prices of total output in a base year and total output in the current year is false. CPI does not measure total output; it measures the average change over time in the prices paid by urban consumers for a basket of consumer goods and services. This fixed basket represents the purchases of the average family of four. While CPI is an essential indicator for inflation and affects many Americans, it is not a measure of total economic output like GDP, which takes into account the quantities of goods and services produced and multiplies them by their prices in a base year to get a measure of GDP with constant prices.
The Consumer Price Index (CPI) measures the average change over time in prices paid by urban consumers for consumer goods and services. It takes the whole economy into account by measuring the prices of total output in a base year and total output in the current year. The CPI is calculated by government statisticians at the U.S. Bureau of Labor Statistics based on the prices in a fixed basket of goods and services that represents the purchases of the average family of four.