Why do both the chain-weighted index for GDP and the CPI overstate actual price increases?
What will be an ideal response?
Both price indices overstate the actual price inflation experienced by economic agents because quality improvements are difficult to measure. For example, the price of computers may stay the same but one can get more computing power for one's money; thus while the price has remained constant, in some sense it has really fallen, but this is difficult to measure.
You might also like to view...
Why might a police officer not pull over someone speeding two miles over the speed limit?
A) The explicit costs of stopping the driver over are too high. B) The opportunity costs of stopping the driver are too high. C) The opportunity costs of topping he driver are too low. D) The explicit costs of stopping the driver are too low.
Use the following demand and supply functions: Demand:Qd = 50 - 4PSupply:Qs = 20 + 2PIf the price is $10, there is a
A. surplus of 40 units. B. shortage of 30 units. C. shortage of 10 units. D. surplus of 30 units. E. none of the above