What does the Consumer Price Index measure?

The Consumer Price Index (CPI) measures the price level and changes of basic consumer goods and services over time. It is a critical economic indicator that tracks the average change in prices that consumers pay for a basket of goods, which typically includes items such as food, clothing, rent, and healthcare. By analyzing these price changes, economists can assess inflation and deflation trends, helping to understand how the purchasing power of money fluctuates over time.

This measurement is key for policymakers, businesses, and individuals as it influences economic decisions, government monetary policy, and cost-of-living adjustments for wages and benefits. Overall, understanding changes in the CPI helps to gauge the overall economic health of a country and the impact on consumer behavior. The other options do not relate to the CPI; they focus on income levels, new business formation, or unemployment, which are measured by other economic indicators.