When the quality of a good improves,the purchasing power of the dollar
A)increases,so the CPI overstates the change in the cost of living if the quality change is not accounted for.
B)increases,so the CPI understates the change in the cost of living if the quality change is not accounted for.
C)decreases,so the CPI overstates the change in the cost of living if the quality change is not accounted for.
D)decreases,so the CPI understates the change in the cost of living if the quality change is not accounted for.

Question

Quizplus · Accepted Answer

When the quality of a good improves, consumers get more value for the same price, effectively increasing the purchasing power of the dollar. If the Consumer Price Index (CPI) does not account for this quality improvement, it will overstate the cost of living because it assumes the same quality as before.

When the Quality of a Good Improves,the Purchasing Power of the Dollar