Final answer:
Substitution bias causes inflation to be overstated; hence, real GDP growth is likely to be understated because the misstated inflation would lead to excessive adjustments when calculating real GDP.
Step-by-step explanation:
If substitution bias leads to an overstatement of inflation, this implies that the method used for calculating the inflation rate does not adequately consider consumers' ability to switch to less expensive alternatives when prices of goods in the fixed basket increase. Consequently, this misrepresentation of inflation usually means that real GDP growth is understated, assuming that nominal GDP is corrected for inflation using a price index subject to substitution bias. If inflation is overstated due to substitution bias, the adjustment to nominal GDP will be too large, leading to a lower reported real GDP than what might truly reflect the economic reality.