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.

Question

Quizplus · Accepted Answer

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.

Changes in the Quality of a Good