When the Quality of a Good Improves While Its Price

question 21

Multiple Choice

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

• A)increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
• B)increases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
• C)decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
• D)decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.

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Definitions:

Trial Balance

An accounting report that lists all the balances of each ledger account to ensure that debits equal credits, used as a tool for checking the accuracy of bookkeeping entries.

T Accounts

A graphical representation used in accounting to show the effects of transactions on individual accounts.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and losses.

Cash Receipts

Inflows of cash, often from sales, interest, or dividends.