Both the CPI and the Chain Index for GDP Overstate

question 170

Multiple Choice

Both the CPI and the chain index for GDP overstate actual changes in cost of living due to:

• A) the income effect.
• B) the difficulty of keeping track of the price of imports.
• C) the difficulty of measuring quality improvements.
• D) the difficulty of keeping track of changing consumer preferences.

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Definitions:

Perpetual Inventory System

A perpetual inventory system continuously updates the record of inventory with each sale or purchase, providing real-time data on the inventory levels.

Merchandise

Goods procured by a business for the purpose of resale to customers.

Inventory

The total amount of goods and materials held by a company intended for sale or to be used in the production of goods sold.

Periodic Inventory System

The periodic inventory system is an accounting method where inventory is physically counted at specific intervals and adjustments are made to the inventory records accordingly.