Choose the answers that makes the passage below correct. Inflation is often meas
ID: 1106123 • Letter: C
Question
Choose the answers that makes the passage below correct. Inflation is often measured by evaluating changes in the cost of a fixed basket of goods and services. This method inflation because it does not account for changes in spending patterns that result from relative price changes. overestimates underestimates This problem in known as O substitution bias O quality/new goods bias index bias improvement bias Another problem with this technique is that it fails to recognize changes in the caliber of goods over time. As an example, consider cable television service. Though the cost has remained relatively constant over time, the development of high-definition programing and more channels imply a substantial difference in caliber. This problem is known as index bias improvement bias substitution bias quality/new goods bias OExplanation / Answer
This method overestimates the problem of inflation because this method does not takes into account the changes that consumers when made due to increase or decrease in price of a good.
This problem is known as substution bias.
This problem is known as quality/new good bias because this technique does not take into account the improvement or modification of good.