When the Quality of a Good Improves, What Happens to the Purchasing

question 174

Multiple Choice

When the quality of a good improves, what happens to the purchasing power of the dollar?

• A) It increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
• B) It increases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
• C) It decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
• D) It decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.

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Definitions:

Efficacy

The ability to produce a desired result or intended outcome, especially of a product or intervention.

Currency

A system of money in general use in a particular country or region, often used in financial transactions and accounting.

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