The Increase in Quality Bias in the Consumer Price Index

question 211

Multiple Choice

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation,but ________ quality increases.This causes the CPI to ________ the cost of the market basket.

• A)also; understate
• B)also; overstate
• C)not; understate
• D)not; overstate

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Definitions:

Political Goods

Political goods are benefits or services provided by governments or political entities that are not easily quantifiable, such as national security or public order.

Competitive Forces

Competitive forces refer to the various external pressures that businesses face in the market, including competition from other firms, the bargaining power of customers and suppliers, and the threat of substitutes.

Competitive Behavior

Actions taken by businesses to gain advantage over their competitors, often through pricing, innovation, or quality improvements.

Aggregate Consumption

The total amount of goods and services consumed in an economy over a specified period.