If a new and better good replaced an older and less expensive good, then the price level measured by the CPI ________.
A)might be either higher or lower than the actual price level
B)is the same as the actual price level because it measures the prices of the actual goods.
C)is higher than the actual price level
D)is lower than the actual price level

Question

Quizplus · Accepted Answer

The CPI may overstate the price level because it doesn't fully account for the increased quality and value of the new good, leading to a higher measured price level than the actual one.

If a New and Better Good Replaced an Older and Less