Because the CPI Is Based on a Fixed Basket of Goods

question 82

Multiple Choice

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. Why is this?

• A)because new goods and services are always of higher quality than existing goods and services
• B)because new goods and services cost less than existing goods and services
• C)because new goods and services cost more than existing goods and services
• D)because when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living

---

Definitions:

Vision And Smell

The sensory processes that allow organisms to see and smell, crucial for navigation, survival, and interaction with the environment.

Sound

Vibrations that travel through the air or another medium and can be heard when they reach a person's or animal's ear, interpreted as acoustic signals by the brain.

Light

Electromagnetic radiation that is visible to the human eye, responsible for the sense of sight.

Prosody

The rhythm, stress, and intonation of speech, which contribute to the meaning, emotion, and emphasis of spoken language.