When the Quality of a Good Improves, What Happens to the Purchasing

question 174

Multiple Choice

When the quality of a good improves, what happens to the purchasing power of the dollar?

• A) It increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
• B) It increases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
• C) It decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
• D) It decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.