Choose the Incorrect Statement

question 8

Multiple Choice

Choose the incorrect statement.

• A)The outlet substitution bias injects an upward bias into the CPI.
• B)When the quality of a good improves over time and as a result the price rises, the CPI counts the entire price rise as inflation and so overstates inflation.
• C)When relative prices change and people substitute to the lower priced good, the CPI ignores the substitution and the CPI overstates inflation.
• D)The CPI basket is constantly updated to allow for the introduction of new goods.
• E)All of the above statements are incorrect.

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Definitions:

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