Price indexes can overstate inflation because they
A) do not contain the prices of any used goods.
B) do not contain the prices of foreign goods.
C) do not contain the prices of services.
D) omit some quality improvements.

Question

Quizplus · Accepted Answer

Price indexes do not always factor in quality improvements, which means that they can overestimate inflation. For example, if a new iPhone is released and costs more than the previous version, the price index may show an increase in the cost of the product. However, if the new iPhone comes with significant improvements in its features, such as a better camera or larger battery, then the inflation rate may actually be lower than what the price index suggests.

Price Indexes Can Overstate Inflation Because They