The commodity substitution bias is most likely to put ________ into the CPI and so ________ the inflation rate.

Question

Quizplus · Accepted Answer

The commodity substitution bias occurs when the price of a particular good increases, causing consumers to switch to cheaper substitutes. However, the CPI does not account for this substitution, leading to an overstatement of inflation. Therefore, choice (C) is correct as it states that the bias puts an upward bias into the CPI and overstates the inflation rate.

The Commodity Substitution Bias Is Most Likely to Put ________