Suppose that over time prices of ALL goods double. Which of the following statement is true?

Question

Suppose that over time prices of  ALL  goods double. Which of the following statement is true?

Accepted Answer

Laspeyers Price Index  measures the change in the cost of living precisely.

Answer

Paashe Price Index necessarily underestimates change in costs of living.

Answer

Laspeyers Price Index necessarily overestimates change in costs of living.

Answer

Laspeyers Price Index necessarily underestimates change in costs of living.

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