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Consider That a Consumer Likes Chicken and Beef Equally Well

Question 8

Multiple Choice

Consider that a consumer likes chicken and beef equally well and in the base year consumes equal amounts of each.If the price of chicken rises sharply next year,she will eat beef almost exclusively.The official CPI,which uses the base year basket as a measure the cost of living,will


A) be biased upward.
B) be biased downward.
C) underestimate the true cost of living.
D) reflect the true changes in the cost of living.

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