It is widely agreed that the consumer price index (CPI) overestimates the U.S. i

Question

It is widely agreed that the consumer price index (CPI) overestimates the U.S. inflation rate. Which of the following are reasons for the upward bias in the CPI? Check all that apply. New technologies are often introduced into the BLS market basket only after a lag. The CPI does not consider quality improvement when looking at the rising prices of most goods and services. The CPI does not include household purchases of imports from other countries. The CPI does not recognize lowering of prices due to expansion of discount outlet chains. The CPI fails to take into account household purchases of used goods, such as used cars and used computers.

Explanation / Answer

Following are reasons for the upward bias in the CPI:

New technologies are often introduced into the BLS market basket only after a lag....Reason for upward bias, because of technology biased

The CPI does not include quality improvement when looking at the rising prices of most goods and ....Reason for upward bias, because of quality biased

The CPI does not recognize lowering of prices due to expansion of discount outlet chains ....Reason for upward bias, because of outlet biased

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