Suppose manufacturers introduce a new model car to replace a car currently included in the CPI basket. The price of the new car is 10 percent higher than the discontinued model, but the new car has additional safety features and amenities. In this situation the CPI will tend to ________ inflation as a result of ________ bias.
A. accurately measure; substitution
B. overstate; quality adjustment
C. overstate; substitution
D. understate; quality adjustment
Answer: B
You might also like to view...
A country has a current account deficit of -$100 billion. This implies that ________
A) payments to foreigners exceed payments received from foreigners B) its exports exceed its imports by $100 billion C) net factor payments from abroad is positive D) net transfers from abroad is positive
Savings accounts are the most liquid of all assets because they can be quickly and easily transferred
a. True b. False Indicate whether the statement is true or false
Civil law provides business with more certainty because it is based on precedent
a. True b. False
Which of the following takes place in the direct finance market?
A) Firms borrow funds from banks. B) Deposits from savers are accumulated and loans made to borrowers. C) Ownership in corporations is sold in the form of preferred stock. D) Banks offer savings accounts to customers.