If the CPI is used as a cost-of-living index incomes are just reflect the changes in the CPI will?

A. Increased by more than the actual change in the cost of living

B. Generally rise by amount 2% a year because the standard of living generally rises by about 2% a year

C. Increased by more than the actual change in quantities

D. Decreased by more than the actual change in quantities

E. Decrease by more than the actual change in the cost of living

If the CPI is used as a cost-of-living index incomes are just reflect the changes in the CPI will Increased by more than the actual change in the cost of living.

Answer: Option A

Explanation:

A country's inflation is calculated by the CPI. That is how the price level of the fixed group of goods and all services reflects the purchases by the consumer. The cost-of-living will represent the cost of a product makes the consumer consume a product that provides them the same amount of satisfaction while buying.

If the fixed group goods are not purchased throughout the year then inflation will be calculated based on the cost of those goods and the cost-of-living. That results in two problems and quality / new goods bias is one of the two.

This quality / new goods bias will conclude in an increase in the expenses of living. Because of the improvement over existing goods and the new goods were not considered by the consumers a lot.