The consumer price index
A) is a 10-year moving average of commodity prices.
B) establishes the maximum price sellers may charge consumers.
C) lists the annual ratios of consumption to disposable income.
D) shows the ratio of cost of a market basket of goods and services in a given year to a base year.
E) is another name for aggregate demand.

Question

Quizplus · Accepted Answer

The consumer price index (CPI) shows the ratio of the cost of a market basket of goods and services in a given year to a base year. The base year is always set as 100, and any increase or decrease in the index reflects changes in the prices of that market basket over time. Therefore, D is the correct choice. A, B, C, and E are incorrect as they do not accurately describe the purpose or calculation of the CPI.

The Consumer Price Index