Final answer:
An index in economics measures inflation, allowing for adjustments in financial decisions to maintain purchasing power. The Consumer Price Index is one such important index.
Step-by-step explanation:
The main purpose of an index, particularly in an economic context as discussed in Chapter 4, is to track changes in prices over time to measure inflation. Specific types of indexes, such as the Consumer Price Index (CPI), report on variations in the cost of living by analyzing the prices of a basket of consumer goods and services. Inflation indexes are crucial as they help individuals, businesses, and government programs adjust their financial decisions to maintain purchasing power and avoid the adverse consequences of inflation. Indexing prevents arbitrary redistributions of wealth due to inflation and provides a guideline for economic policy.