When the consumer price index rises, the typical family

Question

a. has to spend more dollars to maintain the same standard of living.
b. can offset the effects of rising prices by saving more.
c. finds that its standard of living is not affected.
d. can spend fewer dollars to maintain the same standard of living.

Answer 1

When the consumer price index rises, the typical family:

a. has to spend more dollars to maintain the same standard of living.

This option accurately reflects the effect of rising prices, as a higher Consumer Price Index (CPI) indicates that the general price level of goods and services is increasing, which typically requires consumers to spend more to maintain their usual standard of living.