The consumer price index is used to[Fill in the blank]

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BlackTom AI · Accepted Answer

The question asks what the consumer price index (CPI) is used to do, so we need to evaluate each option in terms of CPI’s purpose.
Option a: 'monitor changes in the cost of living over time.' This is accurate because the CPI measures average changes in prices paid by consumers for a basket of goods and services, capturing how the cost of living evolves over time.
Option b: 'monitor changes in the stock market.' The CPI does not track stock prices, market capitalization, or investment indices; it focuses on consumer goods and services, not financial markets.
Option c: 'monitor changes in the level of real GDP over time.' Real GDP is a measure of overall economic output adjusted for inflation, but it is derived from national accounts data and uses price indices separately; the CPI itself is not a measure of GDP levels.
Option d: 'monitor changes in the level of wholesale prices in the economy.' Wholesale prices are typically tracked by indices like the Producer Price Index (PPI), not the CPI, whose scope is consumer prices rather than wholesale (producer) prices.

In summary, each incorrect option targets a different economic metric, while the CPI is specifically designed to reflect changes in consumer prices and hence the cost of living over time.

The consumer price index is used to[Fill in the blank]

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How are the weights on the various goods and services in the CPI basket determined?

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