(b) “Like the CPI, the GDP deflator is subject to substitution bias.” True or false? Explain. (c) “Unmeasured quality change generally causes the CPI to overstate the actual increases in the cost of living.” True or false? Explain. (d) In compiling data for the CPI, the Bureau of Labor Statistics makes no attempt to adjust the data to reflect quality changes.” True or false? Explain.
(b) “Like the CPI, the GDP deflator is subject to substitution bias.” True or false? Explain. (c) “Unmeasured quality change generally causes the CPI to overstate the actual increases in the cost of living.” True or false? Explain. (d) In compiling data for the CPI, the Bureau of Labor Statistics makes no attempt to adjust the data to reflect quality changes.” True or false? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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(a)“Substitution bias generally causes the CPI to understate the actual increases in the cost of living.” True or False? Explain.
(b) “Like the CPI, the GDP deflator is subject to substitution bias.” True or false? Explain.
(c) “Unmeasured quality change generally causes the CPI to overstate the actual increases in the cost of living.” True or false? Explain.
(d) In compiling data for the CPI, the Bureau of Labor Statistics makes no attempt to adjust the data to reflect quality changes.” True or false? Explain.
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