Beginning in 1994, environmental regulations have required that gasoline contain a new additive to reduce air pollution.
Question:
Beginning in 1994, environmental regulations have required that gasoline contain a new additive to reduce air pollution. This requirement raised the cost of gasoline. The Bureau of Labor Statistics decided that this increase in cost represented an improvement in quality.
a. Given this decision, did the increased cost of gasoline raise the CPI?
b. What is the argument in favor of the BLS’s decision? What is the argument for a different decision?
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