Inflation Measures Price Changes Over Time

Steps:

• Recall that inflation is the sustained increase in the general price level of goods and services in an economy.
• Identify the standard metric: the Consumer Price Index (CPI) or similar indices track average price changes.
• Calculate the rate: subtract the previous year's price index from the current year's and divide by the previous year's value, then multiply by 100 for percentage.
• Compare options: only A matches this price-based calculation process.

Why A is correct:

• Inflation rate is defined as the percentage change in a price index (e.g., CPI formula: [(CPI_current - CPI_previous) / CPI_previous] × 100), directly measuring price rises over time.

Why the others are wrong:

• B describes the labor force, which relates to unemployment rates, not inflation.
• C and D both approximate the trade balance (with D specifying values), which measures net exports, not price changes.

Final answer: A