Explanation:

To calculate the purchasing power of money and real wages, we use the Consumer Price Index (CPI), which is represented by option 'B'.

Consumer Price Index (CPI):
The Consumer Price Index is a measure that tracks the average change in prices of a basket of goods and services over time. It is used to estimate the cost of living and inflation rates. The CPI is calculated by collecting data on the prices of various goods and services and comparing them to a base period.

Importance of CPI:
The CPI is an important measure for assessing the purchasing power of money and determining real wages. It helps in understanding the changes in the cost of living and allows for adjustments in wages and government benefits to keep pace with inflation.

Calculation of Purchasing Power of Money:
To calculate the purchasing power of money, we compare the CPI of the current period to the CPI of the base period. The formula is as follows:

Purchasing Power of Money = (CPI of Base Period / CPI of Current Period) * 100

If the result is greater than 100, it means the purchasing power has increased, and if it is less than 100, it means the purchasing power has decreased.

Calculation of Real Wages:
Real wages refer to wages adjusted for inflation. To calculate real wages, we multiply the nominal wage rate by the ratio of the CPI of the base period to the CPI of the current period. The formula is as follows:

Real Wages = Nominal Wages * (CPI of Base Period / CPI of Current Period)

This calculation helps in determining the actual purchasing power of wages by accounting for changes in the cost of living.

Conclusion:
The Consumer Price Index (CPI) is the appropriate index to use when calculating the purchasing power of money and real wages. It provides valuable insights into the changes in prices and allows for adjustments to be made to wages and benefits to maintain the standard of living.