Florida Teacher Certification Examinations (FTCE) Social Science Practice Test

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Which economic indicator measures the price change over time using a fixed market basket of typical goods and services?

Producer price index
Consumer sentiment index
GDP
CPI

The correct answer is: CPI

The Consumer Price Index (CPI) is the economic indicator that measures price changes over time by tracking a fixed market basket of typical goods and services. The CPI reflects the average change in prices that consumers pay for a specific set of items, ranging from food and clothing to rent and healthcare. It is a crucial tool for understanding inflation, as it shows how the cost of living changes and helps policymakers, businesses, and consumers make informed decisions. In contrast, the Producer Price Index focuses on the prices producers receive for their output and does not measure consumer prices directly. The Consumer Sentiment Index gauges consumers' overall optimism or pessimism regarding their financial situation and the economy but does not measure price changes. Gross Domestic Product (GDP) represents the total value of all goods and services produced in a country but is not specifically focused on price changes for a fixed basket of consumer goods.