Recall the Application about the time involved in including cell phones in the calculation of the CPI to answer the following question(s).
-According to this Application, the failure of including cell phones in a timely manner when calculating the CPI caused the telecommunications component of the price index
A) to be biased downward.
B) to be biased upward.
C) to actually register no perceptible bias.
D) to become negative.

Question

Quizplus · Accepted Answer

The failure to include cell phones in a timely manner when calculating the CPI caused the telecommunications component of the price index to be biased upward. This is because the prices of traditional telecommunication services likely appeared to be rising or remaining stable, while the actual consumer expenditure was shifting towards the newer, uncounted cell phone services, which could have been cheaper or represented a better value, thus not accurately reflecting the true cost of telecommunications to consumers.

Recall the Application About the Time Involved in Including Cell