What does CPI stand for and measure?

• A. A measure of wage growth.
• B. An index of the cost of all goods and services to a typical consumer.
• C. The total market value of a country’s exports.
• D. The average age of consumers.

Answer: (B)

CPI measures how the overall price level for goods and services bought by households changes over time. It stands for Consumer Price Index and tracks the cost of a fixed basket of goods and services that a typical household buys. When prices rise, the CPI goes up, signaling inflation and a higher cost of living.

The description that it is an index of the cost of a representative basket of goods and services to a typical consumer is the best fit. It isn’t about wage growth, exports, or the age of consumers.