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Problems with the Consumer Price Index (CPI)
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Problem 7
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Problem 10
Problems with the Consumer Price Index (CPI)
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11. Gross Domestic Product (GDP) and Consumer Price Index (CPI) / Problems with the Consumer Price Index (CPI) / Problem 7
Problem 7
How does quality bias affect the measurement of inflation in the CPI?
A
It understates inflation by including quality improvements in the price increase.
B
It accurately measures inflation by adjusting for quality improvements.
C
It overstates inflation by not accounting for improvements in the quality of goods, only the price increase.
D
It has no effect on inflation measurement as quality improvements are always considered.
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