Commodity Substitution Bias in the CPI Refers to the Fact

question 83

Multiple Choice

Commodity substitution bias in the CPI refers to the fact that the CPI

• A)takes into account the substitution of goods by consumers when relative prices change.
• B)takes no account of the substitution of goods by consumers when relative prices change.
• C)substitutes quality changes whenever they occur without taking account of the cost of the quality changes.
• D)substitutes relative prices for absolute prices of goods.
• E)accounts for improved quality in price rises.

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Definitions:

Depreciation Expense

The methodical distribution of the expense of a physical asset throughout its expected lifespan.

Net Income

Net income is the total profit of a company after all expenses and taxes have been deducted from revenues, indicating the company's financial performance over a specific period.

Variable Costs

Costs that change in proportion to the level of activity or production volume, such as materials and labor.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales activities.