The CPI tends to overestimate the rate of inflation because:
A) Only the goods and services that consumers buy are included in the calculation.
B) Some price increases are an indication of higher quality products.
C) The CPI measures changes in average prices,not changes in relative prices.
D) Some price increases are simply the result of greedy producers and sellers.

Question

Quizplus · Accepted Answer

The CPI (Consumer Price Index) can overestimate inflation because it might not fully account for the fact that some price increases reflect improvements in the quality of goods and services, rather than just a pure increase in prices. This means consumers are getting more value for their money, which isn't a true reflection of inflation.

The CPI Tends to Overestimate the Rate of Inflation Because