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Most Economists Agree That the Consumer Price Index Slightly Overstates

Question 11

Multiple Choice

Most economists agree that the Consumer Price Index slightly overstates the rate of inflation (the decline in the dollar's buying power) . The main reason is that the


A) CPI is not based on a randomized comparative experiment.
B) CPI uses 1982-84 = 100, and this has become out of date.
C) CPI market basket is just a guess at what people really buy; it should be replaced by a random sample of goods and services.
D) CPI doesn't use a standard score, so changes in the standard deviation affect the value of the CPI.
E) fixed market basket doesn't adjust quickly enough for new products and improvements in quality.

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