MEA-1.G—Define the shortcomings of the CPI as a true measure of inflation

Define the shortcomings of the CPI as a true measure of inflation.

• The CPI as a measure of inflation has some shortcomings, such as substitution bias, causing it to overstate the true inflation rate.
• Enduring understanding MEA-1: An economy’s performance can be measured by different indicators such as gross domestic product (GDP), the inflation rate, and the unemployment rate.