Does the Consumer Price Index (CPI) overstate the effects of inflation based off of the products that are now available that are higher in quality then those of a few years ago. Why or why not? Please include any examples or references used.© BrainMass Inc. brainmass.com April 4, 2020, 12:24 am ad1c9bdddf
The answer to the question is yes.
There are a couple of problems with the CPI that cause it to OVERSTATE inflation:
1. The CPI does not allow for a substitution effect. For example, when the price of coffee increases, consumers will ...
The solution gives detailed discussion if Consumer Price Index (CPI) overstate the effects of inflation.