The consumer price index is (1) a comparison of the cost of the typical bundle of goods consumed in period 1 with the cost of a different bundle of goods typically consumed in period 2 . (2) a comparison of the cost of buying a typical bundle of goods during a given period with the cost of buying the same bundle during an earlier base period. (3) the ratio of the average price of a typical market basket of goods compared to the cost of producing those goods during the previous year. (4) a measure of the increase in the average price of all of the goods that are included in the calculation of GDP.

The correct definition of the consumer price index (CPI) is: **(2)** a comparison of the cost of buying a typical bundle of goods during a given period with the cost of buying the same bundle during an earlier base period. ### Explanation: - The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. - It compares the cost of this basket in the current period to the cost of the same basket in a base period, allowing for the assessment of inflation or deflation over time. - The other options do not accurately describe the CPI: - (1) refers to different bundles of goods, which is not how CPI is calculated. - (3) discusses production costs, which relates more to producer price index (PPI). - (4) relates to GDP but does not specifically define CPI. Thus, option (2) is the most accurate description of the consumer price index.