Which of the Following Is Not a Reason That the CPI

question 62

Multiple Choice

Which of the following is not a reason that the CPI may overstate the actual rate of inflation.

• A)improvements in quality are difficult to incorporate in the calculation of the CPI
• B)expanded product variety is difficult to incorporate in the calculation of the CPI
• C)energy price increases are too heavily weighted in the calculation of the CPI
• D)calculation of the CPI does not adequately account for consumer responses to changes in relative prices
• E)calculation of the CPI does not adequately account for consumer shifts to discount stores like, Wal-Mart and Target

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Definitions:

Chance Variation

The unpredictable fluctuations or differences that are observed in different samples from the same population, even under the same conditions.

Production Process

The series of steps and procedures involved in the creation of a product from raw materials.

Cycle

In various contexts, it refers to a series of events that repeat in a predictable sequence or timeframe.

Trend

A general direction in which something is developing or changing, often identified in data analysis to forecast future values.