Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
CPI reflects changes in the price level of a fixed basket of goods and services over time.
B
An increase in CPI indicates a decrease in the cost of living.
C
CPI can be used to assess inflation rates and guide monetary policy.
D
CPI is calculated using current prices without considering historical data.
E
Changes in CPI can impact wage negotiations and economic policy decisions.
Understanding the Answer
Let's break down why this is correct
Answer
The Consumer Price Index (CPI) measures how prices for goods and services change over time. It helps us understand inflation, which is when prices rise, making money less valuable. For example, if the CPI increases, it means that the cost of living is going up, and people might need to spend more money to buy the same things they used to buy for less. The CPI is important for the government because it can influence economic decisions, like adjusting social security payments or setting interest rates. Therefore, understanding the CPI gives people insight into how the economy is doing and how it affects their daily lives.
Detailed Explanation
All the options given about CPI are incorrect. Other options are incorrect because This statement is misleading; An increase in CPI means prices are going up, which usually means the cost of living is also rising, not falling.
Key Concepts
Consumer Price Index
Inflation
Cost of Living
Topic
Understanding Consumer Price Index
Difficulty
medium level question
Cognitive Level
understand
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