Macro-Economics
Answer 1)
a) New Product: Invention of pocket sized computers will not be accounted in CPI Index because new products, whether manufactured or invented are not accounted immediately while calculating Consumer Price Index(CPI). Hence, CPI ignores the impact of cost of living and since new inventions like pocket sized computers usually decrease the prices, their exclusion from calculations results in overestimation of inflation.
b)New Product: Creation of mobile phone also accounts for exclusion of new products from CPI calculation. Since new products are not introduced in CPI basket immediately, their price effect on overall basket of goods ...
