Assume the price of new cars is unchanged from the previous period but new cars now have
Fantastic news! We've Found the answer you've been seeking!
Question:
Assume the price of new cars is unchanged from the previous period but new cars now have better fuel economy and safety features compared to the previous period. Bearing this in mind, which of the following statements is true:
a. The reported inflation rate as measured by CPI will be unchanged.
b.The reported inflation rate as measured by the CPI will fall.
c.Unmeasured quality changes like that presented in this question, cause CPI to understate the true extent of inflation.
d.When the quality of goods improves, the value of goods rises hence inflation always rises.
Related Book For
Economics
ISBN: 978-0073375694
18th edition
Authors: Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn
Posted Date: