The Key Reason That the Laspeyres Price Index Tends to Overstate

question 62

Multiple Choice

The key reason that the Laspeyres price index tends to overstate the impact of price changes on consumers is that it:

• A) only accounts for price increases and ignore price decreases.
• B) measures prices two periods after the actual price changes occurred.
• C) ignores the possibility that consumers alter their consumption as prices change.
• D) All of the above are correct.
• E) none of the above

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Definitions:

Underdetected

Refers to conditions, diseases, or phenomena that go unnoticed or are diagnosed less frequently than they actually occur.

Underprosecuted

Refers to instances where legal actions or criminal prosecutions are insufficiently pursued or carried out.

Underconvicted

The term refers to situations where individuals who commit crimes receive lighter sentences than the severity of their actions warrants, or are not convicted at all.

Powerful

Having great power, strength, influence, or authority over others or situations.