Suppose That Dairy Products Have Risen in Price Less Than

question 88

Multiple Choice

Suppose that dairy products have risen in price less than prices in general over the past several years. Which problem in the construction of the CPI is this price increase most relevant to?

• A) substitution bias
• B) introduction of new goods
• C) unmeasured quality change
• D) income bias

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Definitions:

Rent Controls

A restriction set by authorities on how much landlords can demand for renting out houses or apartments.

Long Run

An economic term for a timeframe in which all factors of production and costs are variable, allowing for full adjustment to changes.

Nominal Growth Rate

The rate at which an economy or financial metric grows over time, including inflation, without adjusting for the latter.

Inflation Rate

The percentage increase in the price level of goods and services in an economy over a period of time, reflecting the purchasing power of currency.