A Quality-Change Bias in the Construction of the CPI Arises

question 143

Multiple Choice

A quality-change bias in the construction of the CPI arises because:

• A) new goods and services are routinely introduced and many of them are not incorporated into the market basket that makes up the CPI.
• B) big box stores that carry electronic goods routinely run sales to reduce their inventories before stocking new models.
• C) newer versions of a product might be more expensive but could also be better than the older version.
• D) consumers also shop at superstores or outlet stores.

Recognize the impact of job characteristics on pay rates.

Grasp the importance of worker productivity on earnings.

Understand the role of worker preferences and discrimination in earning differentials.

Analyze the relationship between investment in human and physical capital and economic growth.

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Definitions:

Relationship

The manner by which two or more ideas, items, or individuals are linked, or the condition of linkage.

Scatter Diagram

A graph that shows the relationship between two variables by displaying data points on a two-dimensional plane.

Mortgage Rate

The interest rate charged on a mortgage loan.

Number of Houses Sold

A real estate metric that refers to the total count of residential dwellings sold during a specific time period.