How does the CPI reveal information about the economy and inflation?

The CPI (Consumer Price Index) measures the prices of a range of goods (called a "basket") against the prices of the same goods in the past. When prices rise over a period of time, we get a percentage increase in the CPI which is how inflation is determined. So the CPI tells us if an economy is overheating (if prices are rising to quickly) or under-performing (where prices are barely rising or even falling which denotes deflation). These conditions can occur when an economy endures over-utilisation of resources or an unemployment gap, respectively. Adjustments in the money supply which affect prices can be taken into account when using the CPI as an indicator of economic growth.|||the CPI tells you nothing about the economy. It tells you whether prices are rising (which is generally the result of an inflation in the money supply).|||if the current cpi is higher than the old cpi, then there's inflation