In Constructing the CPI,the BLS Has to Deal with Commodity

question 248

Multiple Choice

In constructing the CPI,the BLS has to deal with commodity substitution bias,which is defined as

• A)consumers' substitution of discount stores for full service stores to avoid the higher prices in the full service stores.
• B)consumers' substitution of cheaper goods for goods whose prices increase.
• C)the bias from quality changes in existing products that cause prices to increase.
• D)the bias from new goods being introduced that are more expensive than older goods.
• E)the bias that arises because the BLS changes the CPI market basket each month.

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Definitions:

Rate Of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment's initial cost.

Net Present Value

A valuation method that calculates the current worth of a project or investment based on its expected future cash flows.

Initial Investments

The initial capital or resources put into a project, business, or investment, critical for startup and initial operations.

Net Operating Income

a gauge of a company's financial performance, calculated as gross income minus operating expenses, excluding taxes and interest.