Which of the following biases the CPI to underestimate increases in prices?
A)The substitution bias
B)The quality bias
C)The new outlet bias
D)None of the above

Question

Which of the following biases the CPI to underestimate increases in prices?
A)​The substitution bias
B)​The quality bias
C)​The new outlet bias
D)​None of the above

Quizplus · Accepted Answer

The Consumer Price Index (CPI) does not underestimate increases in prices due to the substitution bias, quality bias, or new outlet bias. Instead, these biases are known to potentially overstate the rate of inflation measured by the CPI, not underestimate it.

Which of the Following Biases the CPI to Underestimate Increases