The Substitution Bias in the Construction of the CPI Arises

question 94

Multiple Choice

The substitution bias in the construction of the CPI arises because:

• A) consumers alter their buying habits as new products come into being and lifestyles change.
• B) technological changes have led to improvements in quality and lower production costs over time.
• C) consumers alter the goods they buy, switching from relatively high priced goods toward lower-priced alternatives.
• D) consumers shop at both high-priced department stores and lower-priced discount stores.

Identify characteristics and accounting treatments for various types of investments, including held-to-maturity, trading, and available-for-sale securities.

Distinguish between equity and debt securities and their impact on financial statements.

Describe the impact of investment activities on cash flows and financial ratios.

Know the accounting treatments for interest and dividends received from investments.

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