The consumer price index is based on

A) a basket of intermediate goods typically purchased by firms as inputs in the production process.
B) a basket of goods and services purchased by a typical urban family.
C) a basket of goods that consists of every item included in the nation's GDP.
D) None of the choices are correct.

The consumer price index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Therefore, it is based on a basket of goods and services purchased by a typical urban family. Choice A is incorrect because the CPI does not include intermediate goods typically purchased by firms. Choice C is incorrect because the CPI does not include every item in the nation's GDP, it only includes items purchased by urban consumers. Choice D is incorrect because one of the choices must be correct.