Recall Application 4, "The Introduction of Cell Phones and the Bias

question 197

Multiple Choice

Recall Application 4, "The Introduction of Cell Phones and the Bias in the CPI," to answer the following questions:
-According to the application, the failure to include cell phones in the calculation of the CPI creates an upward bias on the telecommunications component of the CPI by 0.8 to 1.9 percent. If the measured inflation for telecommunications was 5%, then the actual inflation was somewhere between:

• A) 0.8 to 1.9 percent.
• B) 5.8 to 6.9 percent.
• C) 5.9 to 6.8 percent
• D) 3.1 to 4.2 percent.

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Definitions:

Inventory

Goods or materials a business holds for the purpose of resale.

Order

A request to purchase, sell, or supply goods or services.

Total Variable Costs

The cumulative amount of variable expenses incurred in the production of goods or services.

Volume Of Activity

This term refers to the level of operations or the quantity of work done or services provided in a specific period.