Because the CPI Is Based on a Fixed Basket of Goods

question 40

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 have better product warranties 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

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Definitions:

Binge Eating

Involves consuming large amounts of food in a short period of time, often associated with a loss of control over eating.

Long-Term Regulation

involves processes and mechanisms that maintain the stability of physiological systems over extended periods.

Fat Stores

Accumulated lipids within organisms, used for energy storage and insulation, and are a key factor in metabolic health.

Eating Behavior

The patterns, habits, or choices regarding food consumption by individuals, often influenced by social, psychological, and physiological factors.