To the extent that the CPI does not accurately measure the true price level,
A) the BLS will change the underlying market basket of goods
B) it is useless
C) it exaggerates the true cost of living
D) it results in underindexation of social security payments
E) it underestimates the true cost of living

Question

Quizplus · Accepted Answer

The CPI often overstates inflation due to factors like substitution bias, where consumers change their purchasing habits as prices change, leading to an exaggerated perception of the cost of living.

To the Extent That the CPI Does Not Accurately Measure