When the Quality of a Good Deteriorates While Its Price

question 24

Multiple Choice

When the quality of a good deteriorates while its price remains the same,the purchasing power of the dollar

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

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Definitions:

Independent Events

Two or more events where the occurrence of one event does not affect the probability of the other events happening.

Probability

A measure of the likelihood that an event will occur, quantified as a number between 0 and 1.

Union

In mathematics, particularly in set theory, it is the set containing all elements from all sets being considered.

Events A And B

Two occurrences within a probability space that are considered for their individual likelihood as well as their combined or conditional probabilities.