Substitution Bias in the CPI Refers to the Fact That

question 262

Multiple Choice

Substitution bias in the CPI refers to the fact that the CPI

• A) takes into account the substitution of goods by consumers when relative prices change.
• B) takes no account of the substitution of goods by consumers when relative prices change.
• C) substitutes quality changes whenever they occur without taking account of the cost of the quality changes.
• D) substitutes relative prices for absolute prices of goods.

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Definitions:

Financial Statements

Reports that summarize the financial performance and position of a company, including the balance sheet, income statement, and cash flow statement.

Trial Balance

A bookkeeping report that lists the balances of all ledgers and accounts to check that debits equal credits.

Adjusted Trial Balance

A trial balance prepared after all adjustments for accrued, deferred, and estimated items have been posted, showing the balances of all accounts that will be used to prepare the financial statements.

Income Statement

A financial statement that shows a company's revenues, expenses, and net income over a specific period of time.