When the Bureau of Labor Statistics calculates the consumer price index,it assumes that:
A) each consumer maximizes his or her utility.
B) consumers do not substitute cheaper goods for goods whose prices have risen.
C) consumers overspend.
D) there is no unemployment.

Question

Quizplus · Accepted Answer

The Bureau of Labor Statistics assumes that consumers do substitute cheaper goods for goods whose prices have risen, as this is a key component of inflation measurement. Option A is not relevant to calculating the consumer price index, and options C and D are not assumptions made by the Bureau of Labor Statistics when calculating the index.

When the Bureau of Labor Statistics Calculates the Consumer Price