A b c and the define at the bottom

2.4 Price Indices and Inflation ENDURING UNDERSTANDING MEA-1 An economy's performance can be measured by different indicators such as gross domestic product (GDP), the inflation rate, and the unemployment rate. LEARNING OBJECTIVE ESSENTIAL KNOWLEDGE MEA-1.F MEA-1.F.1 a. Define the consumer The consumer price index (CPI) measures the price index (CPI), inflation. change in income a consumer would need in deflation, disinflation, order to maintain the same standard of living the inflation rate, and over time under a new set of prices as under real variables. the original set of prices. b. Explain how price indices MEA-1.F.2 can be used to calculate The CPI measures the cost of a fixed basket of the inflation rate and to goods and services in a given year relative to compare nominal variables the base year. over time periods. X Exclusion: c. Calculate the CPI, the Calculating the producer price index (PPI) is inflation rate, and changes beyond the scope of the course and AP Exam. in real variables. MEA-1.F.3 The inflation rate is determined by calculating the percentage change in a price index, such as CPI or the GDP deflator. MEA-1.F.4 Real variables, such as real wages, are the nominal variables deflated by the price level. MSA-1.0 MEA-1.G.1 Define the shortcomings of The CPI as a measure of inflation has some the CPI as a true measure shortcomings, such as substitution bias, of inflation. causing it to overstate the true inflation rate