The Substitution Bias in the CPI Results from the Index

question 48

Multiple Choice

The substitution bias in the CPI results from the index not taking into account:

• A)the substitution of new goods for old goods in the purchases of consumers
• B)that consumers substitute towards goods that have become relatively less expensive
• C)the substitution of new prices for old prices in the basket of goods from one year to the next
• D)the substitution of quality for quantity in consumer purchases over time

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Definitions:

Privately Owned

A business that is owned by private individuals or entities and not by the government or public investors.

Shares Of Stock

Units of ownership in a corporation that give shareholders a claim on part of the corporation's earnings and assets.

Overhead

All ongoing business expenses not directly attributable to creating a product or service, including rent, utilities, and administrative costs.

Losing Money

The result of an investment or business activity where expenses and losses exceed revenues or gains.