In 1995, the Boskin commission identified the following problem(s) with the computation of the CPI
A) it does not account for the fact that consumers can substitute away from products as they get more expensive
B) an increase in price could be the result of quality improvements rather than an increase in the cost of living
C) it often does not reflect decreases in the cost of living that occur when new goods are introduced
D) all of the above
E) none of the above

Question

Quizplus · Accepted Answer

The Boskin commission identified all three of these problems with the computation of the CPI. The CPI does not account for the fact that consumers can substitute away from products as they get more expensive, it does not distinguish increases in price due to quality improvements versus cost of living increases, and it often does not reflect decreases in the cost of living that occur when new goods are introduced.

In 1995, the Boskin Commission Identified the Following Problem(s) with the Computation