One shortcoming of a cost-of-living index using a basket of goods to represent price levels is that
A) it does not adjust prices to a base year.
B) changes to the quality of the basket items are not measured.
C) the index may not measure inflation over a given period of time.
D) too many adjustments are made in the mix as relative prices change.

Question

Quizplus · Accepted Answer

If the quality of the items in the basket changes over time, it can impact the measurement of price levels and result in an inaccurate cost-of-living index.

One Shortcoming of a Cost-Of-Living Index Using a Basket of Goods