Suppose 'i-phones' are the part of the market basket used to compute the CPI. Assume the price of new model of 'i-phone' is unchanged from the previous period but this new phone has longer battery life compared to the old model. Bearing this in mind, which of the following statements is true:

Group of answer choices

1)The reported inflation rate as measured by the CPI will fall.

2)When the quality of goods improves, the value of goods rises hence inflation always rises.

3)The reported inflation rate as measured by CPI will be unchanged.

4)Unmeasured quality improvements like that presented in this question, cause CPI to understate the true extent of inflation.