alleryStart learning →Which two problems are named as arising with basket-based price measurement?
ARounding and typing errors
BCurrency and border issues
CWeather and season effects
DSubstitution and quality bias
Answer & Solution
Correct answer: D. Substitution and quality bias
1. A fixed basket misrepresents a changing economy.
2. The basket of goods approach has known weaknesses.
3. Two problems arise here.
4. They are substitution bias and quality or new goods bias.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 8 'Inflation'_
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