If this year the CPI is 125 and last year it was 120, what do we know?

Question

Quizplus · Accepted Answer

The CPI (Consumer Price Index) is a measure of the price level of goods and services in an economy. If the CPI has increased from one year to the next, it means that, in general, prices have increased and therefore, the price level has increased. This does not necessarily mean that all goods have become more expensive (choice A), nor that the inflation rate has increased (choice C). It is possible that some goods have become cheaper (choice D), but this would not change the fact that the price level has increased.

If This Year the CPI Is 125 and Last Year