Geoff Goes to the Grocery Store to Make His Monthly

question 2

Multiple Choice

Geoff goes to the grocery store to make his monthly purchase of coffee. As he enters the beverage section, he notices that the price of coffee has been raised by 15 percent, so he decides to buy some tea instead. Which problem in the construction of the CPI is this situation most relevant to?

• A) substitution bias
• B) introduction of new goods
• C) unmeasured quality change
• D) income effect

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Definitions:

Global Prices

The standard cost of goods and services determined by the global market, affecting economies worldwide.

Populist Movement

was a political and social movement in the late 19th century United States that sought to represent the interests of farmers and laborers against the economic elite.

High Freight Rates

The increased costs associated with transporting goods, often due to factors like fuel prices, demand, regulatory fees, and infrastructure issues, impacting economies and consumers.