When a new discount retailer,like Wal-Mart,opens a store,people save money.The CPI
A) completely ignores this
B) accounts for every implication of this
C) misses the reduction in what people pay when they shift but captures the effect from that point on.
D) does not count sales at discount stores.
E) misses the reduction in what people pay only for stores in mid-sized cities.

Question

Quizplus · Accepted Answer

The CPI misses the reduction in what people pay when they shift but captures the effect from that point on. While the CPI takes into account changes in prices over time, it does not necessarily capture the impact of new businesses entering the market and driving down prices. However, it would capture the effect of lower prices in subsequent periods once the new retailer has entered the market. So, option C is the best answer.

When a New Discount Retailer,like Wal-Mart,opens a Store,people Save Money