Suppose Hypothetically That You Buy a Lot of Food Such

question 31

Multiple Choice

Suppose hypothetically that you buy a lot of food such as tofu, veggie burgers, and organic fruit that are not included in the market basket used to compute the CPI. In addition, suppose that all of these goods have become cheaper over the last year, while the overall CPI has increased by 6 percent. Then which of the following is true ?

• A) The CPI will understate the negative impact of inflation on your purchasing power and standard of living.
• B) The CPI will still accurately state the negative impact of inflation on your purchasing power and standard of living.
• C) The CPI will overstate the negative impact of inflation on your purchasing power and standard of living.
• D) Inflation has a larger effect on your standard of living than on the average consumer.

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Definitions:

Goods Value

Goods value represents the importance, worth, or usefulness of a product or service to buyers, often determined by its price, quality, and utility.

Market Supply

The total quantity of a good or service that all producers are willing and able to sell at various prices in a given market.

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single participant has the power to significantly influence prices.

Market Prices

The current prices at which goods and services can be bought or sold in a marketplace, determined by supply and demand forces.