Because of the biases in calculating the CPI, actual inflation is
A) accurately measured.
B) less than the measured inflation rate.
C) more than the measured inflation rate.
D) None of the above because the difference varies from one year to the next.

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) often overstates inflation due to biases such as substitution bias, where consumers change their purchasing habits when prices change, but the CPI basket does not adjust accordingly.

Because of the Biases in Calculating the CPI, Actual Inflation