CFA Practice Question

There are 923 practice questions for this topic.

CFA Practice Question

The substitution bias means the Laspeyres index often shows ______ bias.

A. an upward
B. a downward
C. either a downward or an upward
Correct Answer: A

The Laspeyres index overstates the rise in prices, because it does not take account of substitution away from goods as they become more expensive relative to other goods.

User Contributed Comments 0

You need to log in first to add your comment.