How does new product bias affect the accuracy of CPI measurements?

• A. It can lead to an overstatement of inflation because new products are often excluded from the CPI basket, missing their initial high prices and subsequent price drops.
• B. It has no effect on CPI measurements as new products are not considered in inflation calculations.
• C. It can lead to an understatement of inflation because new products are immediately included in the CPI basket.
• D. It leads to accurate inflation estimation as new products are quickly integrated into the CPI basket.

Answer: (A)