Canadian Securities Course (CSC) Level 1 Practice Exam

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What is the Consumer Price Index (CPI) and what is the formula for it?

An index measuring consumer confidence and spending habits
A measure of stock market performance
An index measuring the price of a basket of goods and services against a base year
An index comparing government spending to revenue

The correct answer is: An index measuring the price of a basket of goods and services against a base year

The Consumer Price Index (CPI) is an index that measures the price of a basket of goods and services typically purchased by households against a base year. It is used to track inflation by comparing the price of this basket of goods and services over time. The formula for calculating the CPI involves dividing the cost of the basket of goods and services in the current year by the cost of the same basket of goods and services in the base year, and then multiplying by 100 to express the result as an index number.