The Increase in Quality Bias in the Consumer Price Index

question 211

Multiple Choice

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation,but ________ quality increases.This causes the CPI to ________ the cost of the market basket.

• A)also; understate
• B)also; overstate
• C)not; understate
• D)not; overstate

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Definitions:

Satisfaction

A measure of how goods and services supplied by a company meet or surpass customer expectation.

Pleasure

A state of feeling pleased or satisfied, often resulting from the fulfillment of a desire or need.

Synonymous

Having the same or nearly the same meaning as another word or phrase in the same language.

Maximize Utility

The economic principle aiming to achieve the highest satisfaction possible from consumption given limited resources.