Suppose Manufacturers Introduce a New Model Car to Replace a Car

question 46

Multiple Choice

Suppose manufacturers introduce a new model car to replace a car currently included in the CPI basket. The price of the new car is 10 percent higher than the discontinued model, but the new car has additional safety features and amenities. In this situation the CPI will tend to ________ inflation as a result of ________ bias.

• A)overstate; substitution
• B)understate; quality adjustment
• C)accurately measure; substitution
• D)overstate; quality adjustment

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Definitions:

Revenue Expected

The income that a company anticipates receiving from its normal business activities, such as sales of goods or services, during a specific period.

Planned Sales

Forecasted or projected revenue figures based on market analysis, historical data, and anticipated sales activities, important for budgeting and strategic planning.

Projected Sales

The estimated amount of sales revenue that a company expects to achieve in a future period based on market research and historical data.

Company Policy

Guidelines and rules established by a company to govern its actions and decisions.