The Consumer Price Index Is Subject to Substitution Bias Because

question 194

Multiple Choice

The consumer price index is subject to substitution bias because

• A)some pairs of goods are complements rather than substitutes.
• B)some goods are inferior rather than normal.
• C)the law of demand applies to most,if not all,goods.
• D)the index does not take into account the likelihood that consumers substitute newly-introduced goods for more-established goods.

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Definitions:

Income Statement

A financial statement that shows a company’s revenues and expenses over a specific period, providing insight into its profitability.

Cash Flow

The total amount of money being transferred into and out of a business, especially affecting liquidity.

Reported Profits

These are the earnings a company officially announces to the public and regulatory bodies, reflecting its performance over a specific period.

Common Stock

Common stock represents shares of ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.