By not taking into account the possibility of consumer substitution, how is the CPI biased?
A) It understates the cost of living because people buy more of the newer goods.
B) It overstates the cost of living because people buy more of the cheaper goods.
C) It understates the cost of living because people have higher incomes and perceive some goods as inferior.
D) It overstates the cost of living because people have higher incomes and perceive formerly luxury goods as necessities.
Correct Answer:
Verified
Q72: Which problem in the construction of the
Q73: When the quality of a good improves,
Q74: Suppose the price of a carton of
Q75: Rebecca bought a cell phone for $500.
Q76: In recent years, there have been increases
Q78: What do economists believe about the bias
Q79: Because the CPI is based on a
Q80: What does the GDP deflator reflect?
A) the
Q81: What is an important difference between the
Q82: Most, but not all, athletic apparel sold
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents