Substitution Bias

question 45

Multiple Choice

Substitution bias

• A)is one factor that causes the CPI to underestimate the inflation rate.
• B)is caused by the poor quality of many imported products.
• C)is one of the primary causes of inflation.
• D)involves consumer behaviour that helps explain why the CPI overestimates the inflation rate.

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Definitions:

Transit Float

The time difference between when a payment is made and when it is available in the recipient's account.

Processing Float

The time delay between when a check is written and when it is actually deducted from the payer's account, often utilized in managing company cash flows.

Cash Balances

Cash balances refer to the amount of currency, coins, and balances in checking and savings accounts that a company holds at any given time.

Pledging Agreement

A contract in which a borrower pledges an asset as collateral for a loan, ensuring the lender can seize the asset if the loan is not repaid.