As currently calculated, the CPI tends to overstate the true inflation rate because
A) the market basket fails to weigh housing costs sufficiently.
B) we cannot know what the true inflation rate is.
C) the market basket selected is inappropriate.
D) it fails to correctly measure quality changes for some products.

Question

Quizplus · Accepted Answer

The CPI fails to correctly measure quality changes for some products, which can result in an overstatement of the inflation rate. For example, if a new computer is released with better features and the same price as the old model, the CPI may not fully account for the quality improvement and may still count it as inflation.

As Currently Calculated, the CPI Tends to Overstate the True