True/False/Uncertain: 1. (10 points) Quality of many products is continuously improved (but not always in a...
True/False/Uncertain: 1. (10 points) Quality of many products is continuously improved (but not always in a directly measurable manner). This causes the CPI (consumer price index) to understate inflation.
Homework Answers
This is one of the limitations of CPI. it does not account for change in quality of products. Products might be costly due to improvements in quality of products. Thus, in such scenario, CPI tends to overstate inflation.
Right : False statement.
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