The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation,but ________ quality increases.This causes the CPI to ________ the cost of the market basket.
A)also; understate
B)also; overstate
C)not; understate
D)not; overstate

Question

Quizplus · Accepted Answer

The increase in quality bias in the consumer price index suggests that when prices increase, they may not only reflect pure inflation but also improvements in quality. However, the CPI does not adequately adjust for these quality improvements, leading it to overstate the actual cost of living by making it seem like consumers are paying more for the same level of goods and services, when in fact they are paying for higher quality.

The Increase in Quality Bias in the Consumer Price Index