When the Quality of a Good Deteriorates While Its Price

question 24

Multiple Choice

When the quality of a good deteriorates while its price remains the same,the purchasing power of the dollar

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

Redistribution

The transfer of income, wealth, or property from some individuals to others through a social mechanism such as taxation, welfare, public services, etc.

Income Redistribution

The transfer of income from certain individuals or groups to others through mechanisms like taxes, welfare, and public services to achieve economic equality.

Poverty Rate

The percentage of the population that lives below the national poverty line, indicating the extent of poverty in a country.

Moral Obligation

A duty which one owes, and which one ought to perform, but which he is not legally bound to fulfill.