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Impact of Lawn Mower Quality Improvement on CPI Calculation

Explore the impact of improved lawn mower quality on CPI calculation, analyzing whether the CPI will rise, fall, or remain the same if quality increases while prices stay constant.

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Impact of Lawn Mower Quality Improvement on CPI Calculation

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  1. AP Macroeconomics Make-up Test #13 Edward Cho

  2. #13 • Suppose lawn mowers are part of the market basket used to compute the CPI. Suppose also that the quality of lawn mowers improves while the price of lawn mowers stays the same. If the Bureau of Labor Statistics is able to precisely adjust the CPI for the improvement in quality, then, other things equal, • A) The CPI will rise. • B) The CPI will fall. • C) The CPI will stay the same. • D) Lawn mowers will no longer be included in the market basket.

  3. NOW LET’S THINK • Since the QUALITY of the LAWN MOWERS had improved but the OTHER THINGS had remained the same. • Since people will tend to buy more lawn mowers if the quality is improved but everything else stayed the same, thus, CPI will RISE. • Which the answer is A) the cpi will rise.

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