Which statement is an objection of using the Consumer Price Index (CPI) to measure changes in the cost of living?

A. The calculated inflation rate is only accurate for an individual who purchases all the goods and services in the basket.
B. The inflation rate is always understated due to substitution bias.


Answer: A. The calculated inflation rate is only accurate for an individual who purchases all the goods and services in the basket.

Reason: The CPI takes into account all the goods and services in the consumer basket and measures inflation based on that information. Thus, the CPI is valid only that the consumer consuming all those goods and services and not anyone who consumes only part of it.

Economics

You might also like to view...

Which of the following is TRUE when a budget deficit exists?

A) Dissaving exists. B) Tax revenues exceed government expenditures. C) A trade surplus exists. D) Government expenditures exceed tax revenues.

Economics

According to Keynes, it is __________ to have __________ holding money

A) possible; capital gains or losses from B) impossible; capital gains and losses from C) possible; a higher opportunity cost of D) impossible; a lower opportunity cost of

Economics

If Cruise with Us and Cruise the World are two luxury cruise lines in tacit collusion and Cruise with Us launches a new advertising campaign that states that it will meet any competitor's price on a comparable cruise, Cruise with Us might be tacitly signaling to Cruise the World that they are willing to ________.

A) maintain current the price B) cut price is exactly half C) raise their price D) lower their price

Economics

The elasticity of demand for gasoline has been estimated to be 2.0, and the standard error is 1.0. The upper and lower bounds on the 95 percent confidence interval for the elasticity of demand for gasoline are:

A. 3 and 2. B. 3 and 1. C. 2 and 1. D. None of the statements is correct.

Economics