A true cost-of-living adjustment in response to a change in prices would compensate consumers so that they would be able to
A)purchase the same bundle they purchased before prices changed.
B)achieve the same level of utility they did before prices changed.
C)face the same choices they did before prices changed.
D)achieve an increase in utility that is equal to the rate of inflation.

Question

Quizplus · Accepted Answer

A true cost-of-living adjustment aims to maintain a consumer's level of utility despite changes in prices, allowing them to achieve the same satisfaction or happiness with their purchases as before the price changes occurred.

A True Cost-Of-Living Adjustment in Response to a Change in Prices