Real Estate Council of Alberta Fundamentals Practice Exam

The Consumer Price Index (CPI) is a crucial economic indicator that measures the average change over time in the prices paid by consumers for a fixed basket of goods and services. This basket typically includes items that are commonly purchased by households, such as food, clothing, transportation, and medical care. By tracking how the prices of these items fluctuate, the CPI provides valuable insight into inflation trends and the overall cost of living.

CPI's relevance lies in its ability to reflect how purchasing power is affected by changes in price levels. When the CPI increases, it indicates that consumers are paying more for the same basket of goods and services, which suggests that inflation is occurring. Conversely, a stable or decreasing CPI suggests that prices are stable or decreasing, which can be indicative of economic health.

The other choices, while related to economic data, focus on different aspects. The Producer Price Index (PPI) measures the average change in selling prices received by domestic producers for their output, not directly reflecting consumer prices. The Cost of Living Index may resemble the CPI but can vary in methodology and scope, depending on what is included in the cost calculations. Gross Domestic Product (GDP) measures the total economic output of a country, quantifying the overall economic activity rather than