The CPI is used to
A)convert nominal GDP into real GDP.
B)monitor changes in the cost of living over time.
C)characterize the types of goods and services that consumers purchase.
D)measure the quantity of goods and services that the economy produces.

Question

Quizplus · Accepted Answer

The CPI (Consumer Price Index) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is used to monitor changes in the cost of living over time, making choice B the correct answer. A is incorrect because the GDP deflator is used to convert nominal GDP into real GDP. C is incorrect because the CPI does not characterize the types of goods and services that consumers purchase, but rather focuses on the change in their prices. D is incorrect because measuring the quantity of goods and services produced is the role of GDP, not CPI.

The CPI Is Used to