The Consumer Price Index (CPI) is the common measure of inflation in the United States and is a Laspeyeres index. The Chained CPI (or similarly PCE Inflation), which are Paasche indices are offered forth as what might be "better" alternatives. a. Explain how the CPI is calculated and describe the things that you perceive to be right and wrong with the measurement b. What is the difference between CPI and Chained CPI? How would a move to Chained CPI likely affect inflation estimates? c. There have been proposals to move cost of living adjustments for social security and inflation adjustments for the federal poverty level (FPL) from CPI to the Chained CPI. What would be the long term effects of such a move for each? d. Changing the way inflation is calculated would also affect Real GDP estimates over time as well as the Real Wage. How would the estimates be affected over time and why? Be explicit.
The
a. Explain how the CPI is calculated and describe the things that you perceive to be right and wrong with the measurement
b. What is the difference between CPI and Chained CPI? How would a move to Chained CPI likely affect inflation estimates?
c. There have been proposals to move cost of living adjustments for social security and inflation adjustments for the federal poverty level (FPL) from CPI to the Chained CPI. What would be the long term effects of such a move for each?
d. Changing the way inflation is calculated would also affect Real
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
