Which of the following makes the Consumer Price Index a less accurate measure of the cost of living?
i. The monthly price survey conducted to collect information about prices is very unreliable.
ii. The existence of a new goods bias in the calculation of the CPI.
iii. The existence of a quality change bias in the calculation of the CPI.

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) may be less accurate due to the existence of a new goods bias and a quality change bias. The new goods bias occurs because the CPI may not fully account for new products that consumers buy, which can affect the measure of cost of living. The quality change bias happens when the CPI does not adequately adjust for improvements or deteriorations in product quality, which also impacts the cost of living measurement. The statement about the unreliability of the monthly price survey is not a commonly cited reason for CPI's inaccuracy in measuring the cost of living.

Which of the Following Makes the Consumer Price Index a Less