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:

Expected Price

The price level that purchasers or sellers anticipate a good or service will have in the future.

Oral Auction

A type of auction where bids are made verbally in the presence of an auctioneer and other bidders.

Bidders

Individuals or entities that offer a specific price for goods, services, or assets, typically in the context of auctions or tendering processes.

Expected Price

The price level that consumers, investors, or businesses predict or assume will prevail in the future based on current information.