Because the CPI Is Based on a Fixed Basket of Goods

question 40

Multiple Choice

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. Why is this?

• A) because new goods and services are always of higher quality than existing goods and services
• B) because new goods and services have better product warranties than existing goods and services
• C) because new goods and services cost more than existing goods and services
• D) because when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living

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Definitions:

Series Circuit

An electrical circuit in which components are connected end-to-end such that current flows through each component in turn without branching.

Current Flow

The passage of electrons through a conductive material, powering electrical devices.

Combination Circuits

Electrical circuits that contain both series and parallel connections within the same circuit.

Parallel Paths

In electrical circuits, parallel paths refer to configuration where components are connected alongside each other, leading to multiple pathways for current to flow, thus reducing the total resistance of the circuit.