The fact the consumers substitute one good for another when prices change is
A) taken into account by the fixed market basket used in calculating the CPI.
B) not taken into account by the fixed market basket used in calculating the CPI.
C) not important to economists.
D) a reason why the CPI is used to calculate inflation rates.
E) a reason why the CPI understates the actual change in the cost of living.
B
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Results of the ultimatum game indicate that most people value fairness enough that they will refuse to participate in a transaction they consider unfair, even if they are worse off financially as a result
Indicate whether the statement is true or false
Which of the following mechanisms helps output to return to potential after a demand shock?
a. Change in business mentality b. Change in nominal wage rate c. Large changes in the capital stock d. Inability of the price level to change e. Change in inventories