The principal reason why the GDP deflator and the CPI both overstate actual changes in prices is that?

Question

Possible answers as follows:

** it is hard to measure quality changes.

       **  the basket of goods purchased by consumers changes.

       **  price data is often inaccurate.

      ** All of the above.

      ** None of the above; the two price indices do not overstate actual price changes.

I chose the 1st one it is hard to measure quality changes?

**possible answers

Answer 1

I agree it is the first one.

The CPI overestimates because the good purchased changes but the deflator underestimates.

In the US the BLS hires thousands of people to check prices all across the country so their will be some measurement error  there is no reason to think it has a systematic bias.

Answer 2

All of them. They underestimate substitutability (elasticity of substitution).

.