Question

Albanda is an agrarian economy located in South Asia. Shen Chou and her friend Wang Tao are discussing the efficacy of the Consumer Price Index.​ Shen, who works with a nonprofit​ organization, says that the Consumer Price Index does not reflect the realities of consumption patterns of the average consumer.​ Wang, a policy​ planner, says that it must be accurate because it was updated only a year ago. Which of the​ following, if​ true, would weaken​ Wang's argument? A. The CPI in Albanda is calculated based on consumption and spending patterns of urban consumers. B. A major objective of the CPI revision in the previous year was to reduce the extent of the bias in the index. C. Even though comparable goods were less expensive in Albanda than in a neighboring​ country, the CPI increased more in Albanda during the period. D. Housing prices in the economy fell during the year because of a decline in speculative buying of​ long-term assets. E. Albanda is heavily dependent on imports of food grains because it has a low proportion of arable land.

Answer 1

Answer: A. The CPI in Albanda is calculated based on consumption and spending patterns of urban consumers

Explanation:

The CPI in Albanda is calculated based on consumption and spending patterns of urban consumers

The economy of Albanda is an an Agrarian Economy which means it is a rural based economy. The economy is based on the production and sale of Agricultural commodities. Using a Consumer Price index that is calculated based on consumption and spending patterns of urban consumers will not provide an accurate consumer price index for this economy