The Consumer Price Index (CPI) is constructed by:
a. estimating the prices of goods and services in the economy at the same rate as the cost of living increases.
b. comparing the value of a "market basket" of goods that consumers typically purchase to the value of the basket in a base year.
c. comparing the value of a "market basket" of goods that consumers typically purchase to the value of the basket in cities around the country.
d. averaging all prices of goods and services in the economy.
CPI is a measure of the price level in an economy. It is calculated as a ratio of expenditures of goods in a market basket in a given year and the expenditure of the same basket in a base year.