CPI Tracks Price Changes for Consumer Goods

Steps:

• Recall that CPI measures the average change over time in prices paid by consumers for a market basket of goods and services.
• Understand that an increase in CPI signals rising prices for these items.
• Eliminate options unrelated to price levels, like living standards or spending.
• Confirm the direct implication: higher CPI means higher costs for the same basket.

Why C is correct:

• CPI is defined as an index of price changes for a fixed basket of consumer goods; an increase directly reflects higher average cost of living.

Why the others are wrong:

• A: Living standards depend on income growth, not just prices; CPI rise could lower them if wages lag.
• B: Consumer spending may fall with higher prices due to reduced affordability.
• D: Purchasing power decreases as money buys less with rising prices.

Final answer: C