Which of the following indices is widely used to measure the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services?

💡 Solution & Explanation

The Consumer Price Index tracks changes in the retail prices of a representative basket of goods and services purchased directly by households. The Wholesale Price Index focuses on goods traded at the bulk stage prior to reaching retail markets. The GDP deflator measures price inflation across all newly produced domestic goods and services rather than a fixed basket. Central banks monitor consumer inflation indices closely when formulating benchmark interest rate adjustments.