Which of the following is an issue associated with the calculation of consumption for practical application in the CCAPM?

A) Goods are consumed immediately
B) Consumption figures are constant and relied on fro decisions
C) Expenditure is reported rather than consumption
D) all of these choices

Question

Which of the following is an issue associated with the calculation of consumption for practical application in the CCAPM?

A) Goods are consumed immediately
B) Consumption figures are constant and relied on fro decisions
C) Expenditure is reported rather than consumption
D) all of these choices

Quizplus · Accepted Answer

From a practical perspective,there are a number of difficulties associated with applying the CCAPM.First,the CCAPM requires a measure of aggregate consumption per capita.This data is generally not available,and hence some proxy must be used.Ideally we want to measure the actual value of consumption;however,consumption statistics tend to be expenditures.This implies that goods are consumed immediately following their purchase,which of course is not true.Further,in order to implement the CCAPM,we require consumption levels at particular points in time.However,reported expenditure figures are for expenditure over a period rather than at a fixed point.A final issue relates to the accuracy of the consumption data.Consumption data inevitably provided in aggregate do not span the entire universe of consumption transactions,and are therefore measured with error.

Which of the Following Is an Issue Associated with the Calculation