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Alexxandr [17]
3 years ago
14

Suppose manufacturers introduce a new model car to replace a car currently included in the CPI basket. The price of the new car

is 10 percent higher than the discontinued model, but the new car has additional safety features and amenities. In this situation the CPI will tend to ______ inflation as a result of ______ bias.A. overstate; substitutionB. understate; quality adjustmentC. accurately measure; substitutionD. overstate; quality adjustment
Business
1 answer:
Harlamova29_29 [7]3 years ago
6 0

Answer:

The correct answer is option D.

Explanation:

The consumer price index is a tool to measure inflation in the economy. It measures the change in price level through a basket of goods generally purchased by the households. It does not include change in quality.  

It is measured as

CPI =  

\frac{Cost\ of\ Market\ Basket\ in\ Base\ Year}{ Cost\ of\ Market\ Basket\ in\ Given\ Year} \ \times\ 100

In the given example, the price of the car is increasing but the quality is improving as well. Since the CPI does not include quality, the inflation rate will be overstated.

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Answer:

losing money

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Helps save you from the out of pocket expense if something bad were to happen.

For example if your roof was damaged by a natural disaster it could cost thousnads of dollars out of a persons pocket.

Insurance will pay the cost to repair it allowing you to be protected from losing money.

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3 years ago
a company purchased supplies for cash, which will be consumed during future months. which of the following correctly describes t
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<h3>What is an Asset? </h3>

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2 years ago
Samantha has a loan with an interest rate of 6.67 percent now, but the rate could increase 2 percent next year. What lending ter
stiv31 [10]

Answer: 3 Variable Rate Loan.

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3 years ago
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Answer:

Evidence based.

Explanation:

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