The CPI overstates increases in the cost of living because it is based on a fixed basket of goods and services. This overestimate occurs because households change their buying patterns in response to price changes. The CPI overstates increases in the cost of living because it doesn't fully account for changes in quality. C. Calculating the Inflation Rate 1. D. Recent Experience 1.
Inflation is a relatively new phenomenon in the United States.
Since 1940 the price level has more or less increased steadily.