In Constructing the CPI,the BLS Has to Deal with Commodity

question 248

Multiple Choice

In constructing the CPI,the BLS has to deal with commodity substitution bias,which is defined as

• A)consumers' substitution of discount stores for full service stores to avoid the higher prices in the full service stores.
• B)consumers' substitution of cheaper goods for goods whose prices increase.
• C)the bias from quality changes in existing products that cause prices to increase.
• D)the bias from new goods being introduced that are more expensive than older goods.
• E)the bias that arises because the BLS changes the CPI market basket each month.

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Definitions:

Inventory

The raw materials, work-in-process products, and finished goods considered to be the portion of a business's assets that are ready or will be ready for sale.

Ending Inventory

The value of goods available for sale at the end of an accounting period, not yet sold.

FIFO

First-In, First-Out, an inventory valuation method that assumes the oldest items are sold first.

Units

The basic quantitative measure used in accounting to represent transactions or balances, often referring to production or sales volumes.