Which statement is NOT true?
A) The consumer price index does not account for product substitutions well.
B) The consumer price index does not account for all goods and services consumed by households.
C) The consumer price index is a cost-of-living index.
D) The consumer price index measures inflation.

Question

Quizplus · Accepted Answer

The consumer price index (CPI) is often used as an indicator to measure inflation, but it is not a true cost-of-living index. A cost-of-living index would measure changes over time in the amount that consumers need to spend to reach a certain utility level or standard of living. The CPI, however, measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, which does not fully capture all aspects of the cost of living.

Which Statement Is NOT True