What type of bias might be introduced if the CPI only represents the change in the price of a gallon of gas? A. new goods bias B. quality change bias C. commodity substitution bias D. outlet substitution bias
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What type of bias might be introduced if the CPI only represents the change in the price of a gallon of gas?
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- What is the effect of the sources of bias on the CPI calculation? A. Changes in relative prices lead consumers to change the items they buy, and the CPI reflects this substitution. B. The new goods bias injects a downward bias into the CPI. C. When faced with higher prices, people use discount stores more frequently and convenience stores less frequently, but the CPI doesn't include this outlet substitution. D. When the quality of a good improves over time, the CPI doesn't include the portion of the price rise attributable to the higher quality in its calculation.What is a consequence that arises from the CPI bias? A. A wage contract linked to the CPI gives workers less income than the firm intended. B. The bias in the CPI decreases government outlays. C. Tax adjustments based on the CPI decrease the amount paid in taxes. D. The bias in the CPI eliminates the need for people to shop in discount stores.Question 17 One problem with the CPI is the "substitution bias," which refers to consumers buying more of a good that has become cheaper and less of a good that has become more expensive. Assume that consumers consider Pepsi and Coke to be substitutes, so that when the price of Coke increases, consumers purchase less Coke and more Pepsi. When the CPI is calculated following the increase in the price of Coke, the substitution bias causes the CPI to O understate inflation since both the increase in the price of Coke and the increase in the amount of Pepsi purchased enter the CPI calculation O understate inflation since only the decrease in the price of Pepsi enters the CPI calculation O overstate inflation since both the increase in the price of Coke and the decrease in amount of Coke purchased enter the CPI calculation overstate inflation since only the increase in the price of Coke enters the CPI calculation
- Because consumers can sometimes substitutecheaper goods for those that have risen in price,a. the CPI overstates inflation.b. the CPI understates inflation.c. the GDP deflator overstates inflation.d. the GDP deflator understates inflation.The CPI overstates inflation because the average consumer buys A. the same basket of goods every week. B. a generally random assortment of goods and services each week because what is. purchased depends on what the consumer needs. C. less of those goods whose relative price has risen. O D. more of those goods whose relative price has risen. E. lower quality goods if they have a choice. Click to select your answer. DII 80 000 000 :二、 F7 F8 F5 F6 esc F3 F4 F1 F2 2$ & @ # 8. 1 2 3 つThe price of a brand-name laptop is $1,000 in 2018 and $1,100 in 2019. How could this price rise inject a bias into the CPI? A. If students buy more generic laptops when brand-name laptops experience a rise in price but the BLS ignores this commodity substitution, then the CPI understates inflation. B. If students buy their laptops online instead of in brick-and-mortar stores but the BLS ignores this outlet substitution, then the CPI understates inflation. C. If the laptop quality has increased but the BLS counts most of the price rise as inflation, then the CPI overstates inflation. D. The CPI has a bias of 1.1 percent a year regardless of price changes.
- The table below pertains to Studious, an economy in which the typical consumer’s basket consists of 5 books and 10 calculators. Year Price of Books Price pf Calculator 2010 $24 $8 2011 $30 $12 2012 $32 $15 - Referring to the above table compute the followings: A- The cost of the basket. B- The consumer price index. C- The inflation rate in 2012.Why do quality improvements probably lead to the CPI ovestating the inflation rate? The CPI overstates inflation if some of the price of improved quality is counted as _____ price for _____ quality. A. an unchanged; unchanged B. a higher; higher C. an unchanged; higher D. a higher; unchangedCommodity substitution bias _______ when the CPI is calculated in 2021 using the 2020 market basket because _______. A. exists; over time preferences change and people prefer to eat pizza rather than pasta B. does not exist; pizza and pasta are not substitutes C. exists; people switch from the relatively more expensive pasta to the relatively less expensive pizza D. does not exist; the CPI market basket is updated frequently to eliminate substitution bias
- 1) Which of the following is FALSE regarding PPI?a. Stands for Producer Price Indexb. In manufacturing, measures the rate of change in prices of products sold as they leave the producerc. Measures the cost of the goods and services bought by firmsd. Measures the cost of the goods and services bought by a typical consumer2) CPI is measured using the ----------------- :a. overall productsb. overall cost of the goods and servicesc. overall cost of oild. none of the aboveHow does commodity subsitution bias influence the CPI? The CPI ____ consumer subsitutions between goods, so when the price of carrots rises and consumers switch to broccoli, the CPI ____ the rise in the price of vegetables. A. ignores; overstates B. incorporates; correctly measures C. ignores; correctly measures D. incorporates; overstatesThe Consumer Price Index (CPI) is the common measure of inflation in the United States and is a Laspeyeres index. The Chained CPI (or similarly PCE Inflation), which are Paasche indices are offered forth as what might be "better" alternatives. a. Explain how the CPI is calculated and describe the things that you perceive to be right and wrong with the measurement b. What is the difference between CPI and Chained CPI? How would a move to Chained CPI likely affect inflation estimates? c. There have been proposals to move cost of living adjustments for social security and inflation adjustments for the federal poverty level (FPL) from CPI to the Chained CPI. What would be the long term effects of such a move for each? d. Changing the way inflation is calculated would also affect Real GDP estimates over time as well as the Real Wage. How would the estimates be affected over time and why? Be explicit.
