One Problem with Keeping the CPI Basket Fixed Is It

question 29

Multiple Choice

One problem with keeping the CPI basket fixed is it:

• A) doesn't accurately isolate price changes from behavior changes.
• B) doesn't allow for changes in people's preferences over time.
• C) can't properly predict when prices will change.
• D) doesn't really capture what a typical household may purchase in a base year.

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Definitions:

Relative Costs

The cost of one good or service compared to another, often considered in terms of the opportunity cost of choosing one option over another.

Labor-Productivity

The measure of the amount of goods and services produced by one hour of labor.

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than others, leading to more efficient international trade.

Comparative Advantage

The ability of an individual, company, or country to produce a particular good or service at a lower opportunity cost than competitors, leading to more efficient international trade.