Question

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

a. decreases, so the cpi understates the change in the cost of living if the quality change is not accounted for.

b. increases, so the cpi overstates the change in the cost of living if the quality change is not accounted for.

c. decreases, so the cpi overstates the change in the cost of living if the quality change is not accounted for.

d. increases, so the cpi understates the change in the cost of living if the quality change is not accounted for?

Answer 1

b. increases, so the cpi overstates the change in the cost of living if the quality change is not accounted for.