US Economic Data: Consumer Price Index (CPI)

What does the Consumer Price Index (CPI) measure?

Choose the correct answer:

a. The monthly change in the prices of typical American goods and services

b. The annual change in the prices of luxury items

c. The quarterly change in the prices of international products

Answer:

The Consumer Price Index (CPI) measures the monthly change in the prices of typical American goods and services.

The Consumer Price Index (CPI) is a key indicator used by economists to measure inflation, which is the general increase in prices. Specifically, the CPI tracks the monthly changes in the prices of goods and services that typical Americans buy regularly. This includes items such as food, housing, clothing, transportation, and medical care.

By monitoring the CPI, analysts can gauge the rate at which prices are rising, which can have a significant impact on the economy and consumer purchasing power. A positive CPI value indicates that prices are increasing, while a negative value would suggest that prices are decreasing.

Therefore, when the most recent month's CPI is 0.2 and the previous month's CPI was 0.4, it means that prices have increased slightly compared to the previous month. This information helps economists and policymakers make informed decisions regarding monetary policy and economic stability.