Question

because a third of government outlays are linked directly to the cpi, as time passes, the cpi bias means that the governments outlays are
larger than needed to keep pace with the cost of living if the cpi is falling from one year to the next, otherwise the outlays are smaller than needed to keep pace with the cost of living.
exactly equal to the changes in the cost of living.
larger than needed to keep pace with the cost of living.
smaller than needed to keep pace with the cost of living if the cpi is falling from one year to the next, otherwise the outlays are larger than needed to keep pace with the cost of living.
smaller than needed to keep pace with the cost of living.

Explanation:

CPI bias refers to the tendency of the Consumer Price Index (CPI) to over - state inflation. When government outlays are linked to the CPI, and the CPI over - states inflation, the government outlays will be larger than what is actually needed to keep pace with the true cost of living.

Answer:

larger than needed to keep pace with the cost of living.