Answer:
Some wages, interest rates, tax rates, and government benefits are influenced by changes in the value of the CPI.
Explanation:
The CPI or consumer price index measures changes in prices of a basket of goods and services that represents consumer consumption in an economy. CPI is a widely accepted measure of inflation rate in a country in a period. Monitoring the CPI is, therefore, tracking the rate of inflation in the economy.
Inflation is a macroeconomic variable that influences borrowing, prices, and the currency's purchasing power. The government monitors inflation to ensure it within the target rate. A high or low inflation rate may affect the government's objective of stable prices and sustainable economic growth.
A high inflation rate causes interest rates to rise. The cost of borrowing becomes expensive when interest rates are high, which slows down the pace of business expansion and new investment. Business people will monitor CPI to determine if it's the right moment to borrow.
Workers are concerned with CPI as an increase in prices erodes their purchasing power. When prices are high, and wages don't increase, workers will be disadvantaged. They will be able to make fewer purchases, which is similar to getting a pay cut.
