The Consumer Price Index (CPI) is essential for measuring inflation because it reflects the average change in prices for a specific group of items, known as the __________. This index is pivotal for understanding how cost-of-living adjustments affect consumers.

The Consumer Price Index (CPI) is essential for measuring inflation because it reflects the average change in prices for a specific group of items, known as the "basket of goods. " This basket includes everyday items such as food, clothing, and housing costs, which are important for consumers. By tracking how the prices of these items change over time, we can see how inflation affects people's purchasing power and overall cost of living. For example, if the prices in the basket of goods increase, it means that consumers have to spend more money to buy the same things they used to buy for less. Understanding the CPI helps people and businesses make better financial decisions based on how much prices are rising.