The Consumer Price Index (CPI):
A) is calculated using a basket of goods and services adjusted annually by government statisticians.
B) answers the question, "How much more does it cost today to buy the same basket of goods and services that were purchased at some fixed time in the past?"
C) does not suffer from substitution bias because the basket used to measure prices changes every year.
D) understates the impact of price changes.

Question

Quizplus · Accepted Answer

The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, reflecting the cost to purchase the same basket at different times.