The base period for CPI calculations is generally 1982-84. In 2005, 50% of households accessed the Internet through a broadband connection that would not have existed in the 1980s
This potential for bias in the CPI is referred to as ________ bias and results in ________.
A) outlet; the CPI overestimating the true change in the cost of living
B) outlet; the CPI underestimating the true change in the cost of living
C) new product; the CPI overestimating the true change in the cost of living
D) net product; the CPI underestimating the true change in the cost of living
C
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Suppose $1 = 10.5 pesos in New York and $1 = 9.6 pesos in Mexico City.If you had $10,000 using arbitrage, your profits would be:
a. $937.50. b. 937 pesos. c. 9,600 pesos. d. $790.
If the nominal interest rate on a one-year loan was 7%, the actual inflation rate over the year was 3% and the expected inflation rate over the year was 2.5%, then the expected real interest rate equals
A) 4.5%. B) 4.0%. C) 3.75%. D) 3.5%.