Which of the following statements about the Consumer Price Index is the most accurate?
A)When it increases, the average family has to spend less to maintain their standard of living.
B)When it increases, the average family has to spend more to maintain their standard of living.
C)It is a broader measure of inflation than is the GDP deflator.
D)When it increases, the standard of living of the average family does not change.

Question

Quizplus · Accepted Answer

The most accurate statement about the Consumer Price Index is that when it increases, the average family has to spend more to maintain their standard of living. This is because the CPI measures the average price level of a basket of goods and services consumed by households, so an increase in the index indicates that prices are generally rising. As a result, it takes more money to purchase the same amount of goods and services, reducing the purchasing power of households and increasing the cost of maintaining their standard of living.

Which of the Following Statements About the Consumer Price Index