Question

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the cpi

a. fails to measure all changes in the quality of goods.
b. displays a housing bias.
c. accounts for changes in prices of some goods, but prices of certain goods are assumed to remain constant.
d. all of the above are correct.

Answer 1

The correct answer is C) Accounts for changes in prices of some goods, but prices of certain goods are assumed to remain constant.

Answer 2

The correct answer is letter "A": fails to measure all changes in the quality of goods.

Step-by-step explanation:

The Consumer Price Index or CPI is considered the benchmark inflation guide for a country's economy. It uses a basket of goods approach that aims to compare a consistent base of products from year to year focusing on products that are bought and used by consumers daily. Though, the CPI fails in not considering the introduction of new products into the market and the changes in the quality of those products.