Asked by Thanh Nhàn on Jul 21, 2024
Verified
Changes in the quality of a good
A) do not present a problem in the construction of the consumer price index.
B) present a problem in the construction of the consumer price index, and that problem is sometimes referred to as substitution bias.
C) are not accounted for, as a matter of policy, by the Bureau of Labor Statistics.
D) can lead to either an increase or a decrease in the value of a dollar.
Consumer Price Index
An index measuring the weighted average of prices of a basket of consumer goods and services, used as a measure of inflation.
Substitution Bias
The error made in inflation measurement due to changes in consumer purchasing behavior as they substitute cheaper goods for more expensive ones.
Quality
The degree to which a product or service meets certain standards or satisfies specified criteria, often related to excellence or superiority in performance.
- Comprehend the consequences of various types of inflationary measures on economic indices.
- Determine the effects of changes in the quality of goods and the introduction of new goods on economic measures.
Verified Answer
MH
Marissa HinojosJul 22, 2024
Final Answer :
D
Explanation :
Changes in the quality of a good can indeed affect the value of a dollar, as improvements in quality may lead to higher prices (decreasing the value of a dollar), while decreases in quality could lead to lower prices (increasing the value of a dollar). This reflects the concept that the consumer price index (CPI) attempts to measure changes in the cost to the consumer of maintaining a constant standard of living, and changes in quality directly impact this cost.
Learning Objectives
- Comprehend the consequences of various types of inflationary measures on economic indices.
- Determine the effects of changes in the quality of goods and the introduction of new goods on economic measures.