Inflation is primarily measured by which of the following?

Inflation is primarily measured by the change in the general price level of a selected basket of goods. This measurement is typically captured through indices such as the Consumer Price Index (CPI) and the Producer Price Index (PPI). These indices track the prices of a predetermined set of goods and services over time, enabling economists to assess how the overall price level of these items changes. A rise in this index suggests an increase in inflation, indicating that consumers have to pay more for the same basket of goods compared to previous periods.

The selected basket reflects common consumer purchases, allowing for a broad representation of price changes within the economy. By focusing on this measure, it provides a clear picture of how inflation impacts the purchasing power of consumers and the cost of living.