The principal reason why the chain-weighted index for GDP and the CPI both overstate actual changes in prices is that
A) it is hard to measure quality changes.
B) the basket of goods purchased by consumers never changes.
C) price data is often inaccurate.
D) all of the above

Question

Quizplus · Accepted Answer

The principal reason why the chain-weighted index for GDP and the CPI both overstate actual changes in prices is that it is hard to measure quality changes. This is because it is difficult to quantify the improvements in the quality of goods and services over time, which can lead to an overestimation of the true price increase. While price data accuracy and the unchanging basket of goods can also contribute to an overstatement of price changes, the difficulty in measuring quality changes is the most significant factor.

The Principal Reason Why the Chain-Weighted Index for GDP and the CPI