SIE practice questionmediumCPI and Inflation Measurement
The Consumer Price Index (CPI) measures:
- AThe total output of the manufacturing sector
- BThe price changes of goods at the wholesale level
- CThe unemployment rate in the economy
- DThe average change in prices paid by consumers for a basket of goods and services✓ Correct answer
Explanation
Why D — The average change in prices paid by consumers for a basket of goods and services
The CPI measures the average change over time in prices paid by urban consumers for a market basket of consumer goods and services. It is the most widely used measure of inflation from the consumer's perspective. Choice A describes the Producer Price Index (PPI), which measures wholesale-level price changes. The CPI is a lagging indicator — it reflects price changes that have already occurred.
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