Cost of living indices tend to ignore

Question

Quizplus · Accepted Answer

Cost of living indices often do not take into account the substitution effect, which refers to people adjusting their purchases in response to price changes. As prices increase for certain goods, people may switch to cheaper alternatives, which can affect the overall cost of living. This effect is not always accounted for in cost of living indices. Interest rate increases or decreases may indirectly impact the cost of living, but they are not typically included in the calculation of such indices.

Cost of Living Indices Tend to Ignore