Which of the following statements about the CPI is (are)correct?
I The only significant bias in the CPI is the commodity substitution bias.
Ii.The CPI probably overstates inflation by 1.1 percentage points a year.
Iii.As far as the bias in the CPI is concerned,the new goods bias and the outlet substitution biases are irrelevant.

Question

Quizplus · Accepted Answer

Statement I is incorrect as there are other biases in the CPI such as the new goods bias and the outlet substitution bias. 
Statement II is correct as there is evidence to suggest that the CPI may overstate inflation by around 1.1 percentage points a year. 
Statement III is incorrect as both the new goods bias and the outlet substitution bias are relevant biases in the CPI.

Which of the Following Statements About the CPI Is (Are)correct