Which term refers to the general price level changes for consumer goods and services over time?

• A. Consumer price index (CPI)
• B. Stagflation
• C. Business cycle
• D. Recession

Answer: (A)

Prices across the goods and services that households buy tend to rise or fall over time; this overall movement is inflation (or deflation). The Consumer Price Index is the standard gauge of that change because it tracks the average price changes for a representative basket of consumer goods and services and shows how the overall price level evolves. That’s why it’s the best term for describing general price level changes over time. The other terms describe different phenomena: stagflation is inflation with stagnant growth, the business cycle refers to fluctuations in overall economic activity, and a recession is a sustained decline in economic activity.