If consumers purchase fewer of those products that increase most in price and more of those products that increase less in price as compared to the CPI bam changes in the CPI . overstate the true rate of inflation are totally unrelated to the true rate of inflation reflects the increase in quality bias understate the true rate of inflation accurately reflect the true rate of inflation

If consumers purchase fewer of those products that increase most in price and more of those products that increase less in price as compared to the CPI bam changes in the CPI . overstate the true rate of inflation are totally unrelated to the true rate of inflation reflects the increase in quality bias understate the true rate of inflation accurately reflect the true rate of inflation

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Unemployment And Inflation

Section: Chapter Questions

Problem 3.7P

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Similar questions

The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1=940, year 2=970, year 3=1000, and year 4=1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.
Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?
Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the CPI to convert from nominal to real would be more appropriate man using the GDP deflate:
If inflation rises unexpectedly by 5, indicate for each of the following whether the economic actor is helped, hurt, or unaffected: A union member with a COLA wage contract Someone with a large stash of cash in a safe deposit box A bank lending money at a fixed rate of interest A person who is not due to receive a pay raise for another 11 months
Construct the price index for a fruit basket in each year using 2003 as the base year.
Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of 20,000. However, if the inflation rate is 6 per year, how much buying power will that 20,000 have when measured in todays dollars? Hint: Start by calculating the rise in the price level over the 16 years.
Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the GDP deflator to convert from nominal to real would be more appropriate than using the CPI.