Question

What is the Consumer Price Index​ (CPI)? How is it supposed to be related to​ inflation?

Choose the correct answer below.
_______________________________________
A. It is a way of measuring the prices consumers pay for products. It allows one to see how prices have changed with​ time, and therefore measures inflation.
B. It is a way of measuring consumer attitudes. It can gauge whether people are likely to be spending or​ saving, which, in​ turn, is related to inflation.
C. It is a way of comparing the prices consumers pay for products to the prices producers​ (manufacturers) pay for the goods they purchase. It allows one to see how prices have changed with​ time, and therefore measures inflation.

Answer 1

Explanation:

A. It is a way of measuring the prices consumers pay for products. It allows one to see how prices have changed with time, and therefore measures inflation.

Answer 2

The correct answer is A.

The Consumer Price Index (CPI) is a statistical measure that examines the average price of a basket of goods and services that consumers commonly purchase. It is a way of measuring the prices that consumers pay for products, which allows one to see how prices have changed with time. The CPI is widely used as a tool for measuring inflation because it reflects changes in the cost of living for consumers over time. Inflation refers to the rate at which the general level of prices for goods and services is rising, and the CPI is designed to track this trend over time. Therefore, the CPI is directly related to inflation, and it is one of the most widely used indicators of economic performance in many countries.