Which of These Events Would Cause the Consumer Price Index

question 57

Multiple Choice

Which of these events would cause the consumer price index to overstate the increase in the cost of living?

• A)Car makers benefit from a new technology that allows them to sell higher-quality cars to consumers with no increase in price.
• B)Energy prices decrease,and consumers respond by buying more gas and electricity.
• C)A new good is introduced that renders cellular telephones inferior and obsolete.
• D)All of the above are correct.

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Definitions:

Profit

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, typically represented by the yield of long-term government bonds.

Stock Index

A measurement of the performance of a group of stocks, which represents a portion of the overall market.

Anticipated Dividend

Expected payment of dividends from a stock, often based on the company's earnings forecasts or past dividend payments.