Which of the Following Is NOT a Consequence of the CPI

question 5

Multiple Choice

Which of the following is NOT a consequence of the CPI bias?

• A)The state of the economy will be understated.
• B)The CPI-indexed government transfer payments will be higher than the amount planned.
• C)The monetary policy that targets inflation will need to adjust for the CPI bias.
• D)The economic growth rate will be biased upward.

---

Definitions:

Direct Materials

Basic substances that can be directly linked to the production process of a good.

Direct Labor

Labor costs that can be directly traced to the production of specific goods or services, such as wages for assembly line workers.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to products or job orders, calculated before the period begins based on estimated costs and activity levels.

Manufacturing Overhead

All indirect manufacturing costs, including indirect labor, materials, and other expenses not directly tied to the production of goods.