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AP Macroeconomics Mea 1 G Define the Shortcomings of the Cpi As a True Measure of Inflation Questions

Explain why a fixed-basket CPI can overstate changes in the true cost of living when consumers substitute goods or product quality improves.

Syllabus
Effective Fall 2026
Course
AP Macroeconomics

Exam points

  • explain how substitution toward relatively cheaper goods causes a fixed-basket CPI to overstate inflation
  • explain how unmeasured product-quality improvements can cause CPI to overstate the cost-of-living increase

AP Macroeconomics Mea 1 G Define the Shortcomings of the Cpi As a True Measure of Inflation Questions question 1

[Maximum number: 1]

． Which of the following statements explains why the consumer price index（CPI）may overestimate the true inflation rate？

A

（A） The CPI includes the prices of the newest products available to consumers．

B

（B） Improvements often result in higher prices on products．

C

（C） Consumers substitute away from more expensive products．

D

（D） The CPI includes prices of only domestically produced products．

E

（E） The CPI includes the prices of imported products．

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