Which of the following means that the CPI overstates the actual inflation rate?
A) new goods bias
B) outlet substitution bias
C) quality change bias
D) All of the above cause the CPI to overstate inflation

Question

Quizplus · Accepted Answer

All of the bias mentioned (new goods bias, outlet substitution bias, and quality change bias) cause the CPI to overstate inflation because they do not account for changes in consumer behavior and improvements in the quality of goods and services over time. As a result, the CPI may overstate the actual inflation rate, leading to inaccurate measurements of prices and potentially affecting government policies and decisions.

Which of the Following Means That the CPI Overstates the Actual