Professional in Human Resources (PHR) Practice Exam

The consumer price index (CPI) serves as a crucial economic indicator that measures the average change over time in prices that consumers pay for a basket of goods and services. Essentially, it reflects the inflation rate and is instrumental in understanding how price changes affect purchasing power. The CPI is calculated by monitoring the prices of these items over time and provides insights into the cost of living and economic health.

Measuring the average change in prices paid by consumers helps policymakers, businesses, and economists gauge the effectiveness of economic policies and make informed decisions. It influences interest rates, wage negotiations, and social security benefits, thereby highlighting its significance in the economic landscape. Understanding CPI is vital for interpreting trends in economic activity and consumer behavior as it directly impacts consumer spending and overall economic stability.