Inflation Rate

What is the primary measure used to calculate the inflation rate?  

A) The Consumer Price Index (CPI)  

Correct! The Consumer Price Index (CPI), which tracks the average change in prices paid by consumers for a basket of goods and services, is the primary measure used to calculate the inflation rate. 

B) The Producer Price Index (PPI)  

Incorrect. The Producer Price Index (PPI) measures the average change in prices received by domestic producers for their output.  

C) The Employment Cost Index (ECI)  

Incorrect. The Employment Cost Index (ECI) measures the change in the cost of labor.  

D) The Gross Domestic Product (GDP) deflator  

Incorrect. The GDP deflator is a measure of the level of prices of all new, domestically produced, final goods and services in an economy, but it is not the primary measure used to calculate the inflation rate.