What does the Consumer Price Index (CPI) primarily measure?

The Consumer Price Index (CPI) primarily measures the level of inflation for consumer goods and services. It reflects the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, which includes items such as food, clothing, housing, and medical care. By tracking these price changes, the CPI provides valuable insight into the purchasing power of money and the cost of living. This measurement is crucial for economists and policymakers as it helps to assess economic conditions and inform decisions regarding interest rates, wages, and social security benefits.

The other choices are related to different economic indicators: unemployment rates pertain to joblessness within the labor market, consumer savings focus on the liquidity and financial health of households, and manufacturing output relates to the total production and economic activity within the industrial sector. Each of these metrics serves a distinct purpose in economic analysis, but they do not encompass the primary focus of the CPI, which is strictly about inflation in consumer pricing.