In 1996 the Boskin Commission was established to determine the accuracy of the CPI. The commission concluded that the CPI overstated inflation by 1.1%. The commission described four biases in the way the CPI was determined.
a. What are the main sources of bias that are generally believed to make the CPI overstate the inflation rate? By how much did Boskin estimate the CPI overstates the inflation rate?
b. Do the substitutions among different kinds of meat make the CPI biased up or down?
c. Why does it matter if the CPI overstates or understates the rate of inflation?