What is the basic purpose of the consumer price index (CPI)?

The consumer price index (CPI) primarily serves to track monthly changes in the prices paid by urban consumers for a specified basket of goods and services. This index reflects the cost of living and is widely used to assess inflation and deflation within an economy. By measuring price changes over time, the CPI helps economists, policymakers, and researchers understand how purchasing power changes and how prices affect consumer spending.

The focus on urban consumers is particularly significant as this demographic often represents a substantial portion of consumer activity. By monitoring the trends in CPI, various stakeholders can make informed decisions regarding economic policies, wage negotiations, and investments.

Other options refer to different economic indicators or measures that serve separate purposes. For example, determining average income is related to income surveys, unemployment rates are gauged through labor statistics, and productivity assessment pertains to different metrics in industry performance. Each of those aspects plays a distinct role in economic analysis but does not encompass the core function of the CPI.