Question

The Consumer Price Index is a measure of __________.
Select one:
a. recession.
b. inflation.
c. purchasing power.
d. GDP.
e. consumption.

Answer 1

The Consumer Price index is a measure of inflation and purchasing power. Therefore option b and c are correct.

The Consumer price Index is the aggregate price level in an economy. The CPI consists of a bundle of commonly purchased goods and services.

It examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. It measures the changes in the purchasing power of a country's currency and the price level of a basket of goods and services.

Changes in the CPI are used to assess price changes associated with the cost of living. The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.