Which of the Following Means That the CPI Overstates the Actual

question 407

Multiple Choice

Which of the following means that the CPI overstates the actual inflation rate?

• A) new goods bias
• B) quality change bias
• C) outlet substitution bias
• D) All of the above cause the CPI to overstate inflation.

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Definitions:

Job Order Cost System

An accounting system that accumulates costs for each individual job or project to determine its profitability.

Flow Of Costs

The way costs move through inventory accounts, eventually ending up as cost of goods sold on the income statement.

Accumulating Manufacturing Costs

The process of tracking and collecting all the costs associated with the production of goods, from raw materials to labor.

Raw Materials Inventory

The stock of unprocessed materials used in the production of goods.