Description of this paper

The substitution bias in the Consumer Price Index

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solution


Question

The substitution bias in the Consumer Price Index occurs because;A. The Consumer Price Index includes the prices of only domestically produced goods when in fact consumers buy imported goods.;B. The Consumer Price Index assumes that the average consumer buys a fixed basket of goods when in fact consumers can substitute away from more expensive items toward cheaper items.;C. The Consumer Price Index counts only price increases and ignores any price decreases.;D. The Consumer Price Index includes the prices of every good and service when in fact consumers do not typically buy every good and service.

 

Paper#24038 | Written in 18-Jul-2015

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