The technique currently used to calculate the CPI implicitly assumes that over time consumers buy
A) goods and services whose quality improves at the rate of growth of real income.
B) the same relative quantities of goods as in a base year.
C) relatively less of goods whose relative prices are rising.
D) relatively more of goods whose relative prices are rising.

Question

Quizplus · Accepted Answer

The CPI calculates the price change of a basket of goods and services relative to a base year. To do this, it is assumed that consumers purchase the same relative quantities of goods and services as in the base year. This assumption helps to isolate the effect of price changes on the cost of living.

The Technique Currently Used to Calculate the CPI Implicitly Assumes