CPI Increase Signals Rising Prices Steps:

• CPI measures average price changes for consumer goods and services.
• An increase in CPI indicates inflation, meaning the same basket of goods costs more.
• This directly raises the overall cost to maintain the same standard of living.
• Thus, the primary effect is an elevated cost of living.

Why A is correct:

• CPI is defined as the key indicator of cost-of-living adjustments, tracking price level rises.

Why the others are wrong:

• B: Consumer expenditure may not increase; it depends on income growth and could stay flat or rise nominally but not in real terms.
• C: Living standards reduce only if inflation exceeds income gains, not directly from CPI rise alone.
• D: Real disposable income falls if nominal income doesn't adjust for inflation, but CPI itself measures prices, not income effects.

Final answer: A