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:

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