A changing-basket price index (Passche index) like the GDP deflator tends to: a. underestimate the change in the cost of living because it does not take into account that  people can substitute less-expensive goods for ones that become more expensive. b. overestimate the change in the cost of living because the continual introduction of new  goods makes consumers better off even if prices do not fall. c. underestimate the change in the cost of living because it does not reflect the reduction in  consumers’ welfare that may result from the substitutions of less expensive goods for  more expensive ones. d. overestimate the change in the cost of living because it takes into account that people can  substitute less expensive goods for more expensive ones.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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 A changing-basket price index (Passche index) like the GDP deflator tends to:
a. underestimate the change in the cost of living because it does not take into account that 
people can substitute less-expensive goods for ones that become more expensive.
b. overestimate the change in the cost of living because the continual introduction of new 
goods makes consumers better off even if prices do not fall.
c. underestimate the change in the cost of living because it does not reflect the reduction in 
consumers’ welfare that may result from the substitutions of less expensive goods for 
more expensive ones.
d. overestimate the change in the cost of living because it takes into account that people can 
substitute less expensive goods for more expensive ones.

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