Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 22, Problem 25CTQ
Imagine that the government statisticians who calculate the inflation rate have been updating the basic basket of goods once every 10 years, but now they decide to update it every five years. How will this Change affect the amount of substitution bias and quality/new goods bias?
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Chapter 22 Solutions
Principles of Economics 2e
Ch. 22 - Table 22.4 shows the fruit prices that the typing...Ch. 22 - Construct the price index for a fruit basket in...Ch. 22 - Compute the inflation rate for fruit prices from...Ch. 22 - Edna is living in a retirement home where home...Ch. 22 - How to Measure Changes in the Cost of Living...Ch. 22 - The Consumer Price Index is subject to the...Ch. 22 - Go to this website...Ch. 22 - If inflation rises unexpectedly by 5, would a...Ch. 22 - How should an increase in inflation affect the...Ch. 22 - A fixed-rate mortgage has the same interest rate...
Ch. 22 - How do economists use a basket of goods and...Ch. 22 - Why do economists use index numbers to measure the...Ch. 22 - What is the difference between the price level and...Ch. 22 - Why does substitution bias arise if we calculate...Ch. 22 - Why does the quality/new goods bias arise if we...Ch. 22 - What has been a typical range of inflation in the...Ch. 22 - Over the last century, during what periods was the...Ch. 22 - What is deflation?Ch. 22 - Identity several parties likely to he helped and...Ch. 22 - What is indexing?Ch. 22 - Name several forms of indexing in the private and...Ch. 22 - Inflation rates, like most statistics, are...Ch. 22 - Given the federal budget deficit in recent years,...Ch. 22 - Why is the GDP deflator not an accurate measure of...Ch. 22 - Imagine that the government statisticians who...Ch. 22 - Describe a situation, either a government policy...Ch. 22 - Describe a situation, either a government policy...Ch. 22 - Why do you mink the U.S. experience with inflation...Ch. 22 - If, over time, wages and salaries on average rise...Ch. 22 - Who in an economy is the big winner from...Ch. 22 - If a government gains from unexpected inflation...Ch. 22 - Do you think perfect indexing is possible? Why or...Ch. 22 - The index number representing the price level...Ch. 22 - The total price of purchasing a basket of goods in...Ch. 22 - With in 1 or 2 percentage points, what has the...Ch. 22 - If inflation rises unexpectedly by 5, indicate for...Ch. 22 - Rosalie the Retiree knows that when she retires in...
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- Suppose you are a Social Security recipient. In 2006 you receive $700 per month in Social Security benefits. In October of that year the Social Security Administration announces that the cost-of-living adjustment for 2007 will be 3.2 percent, roughly matching the overall inflation rate. Instructions: Enter your response rounded to the nearest cent (two decimal places). a) How much will your 2007 monthly benefits be? $ b) In real terms, your benefits (Click to select) v Next 28 of 67arrow_forwardIn Zimbabwe the rate of inflation hit 90 sextillion percent in 2009, with prices increasing tenfold every day. At that rate, how much would a $2 jug of milk cost six days later? Hint: Use the following equation to calculate future price: Future price = (current price) x (inflation rate)t, where t is the number of days in the future. Instructions: Round your response to one decimal place. $ millionarrow_forwardExplain how the removal of online purchase taxes on ICT devices may effect a country's inflation rate.arrow_forwardIn Zimbabwe the rate of inflation hit 90 sextillion percent in 2009, with prices increasing tenfold every day. At that rate, how much would a $100 textbook cost one week later? Hint: Use the following equation to calculate future price: Future price = (current price) x (inflation rate)', where t is the number of days in the future. billionarrow_forwardhow important is the inflation for the common people in the community? explain.arrow_forwardPlease explain this correctly I upvote Not copy paste. Q) Would you rather live in the U.S. in 1900 with an income of $1 million per year, or in the U.S. in 2020 with an income of $50,000 per year (assume we've accounted for inflation and the incomes for both years are measures in 2020 dollars)? Explain.arrow_forwardConsider a telephone call to London that currently would cost $5. If the real price oftelephone calls does not change in the future, how much will it cost you to make a call to London in 50 years if the inflation rate is 5% (roughly its average over the past 30 years)? What if inflation is 10%.arrow_forwardInflation is a general rise in the level of prices; however, our measures of inflation collect price information on thousands of goods, and firms set these prices. Most firms set prices as “a mark-up over costs”: P = (W/A) x (1 + z). Use this equation to explain the factors that influence inflation.arrow_forwardWhy does the “quality/new goods bias” arise if we calculate the inflation rate based on a fixed basket of goods?arrow_forwardThere has been some recent debate among economists about how inflation is measured. The Con- sumer Price Index (CPI) reflects prices for a fixed market basket of goods and services based on the spending of urban consumers. Define the "substitution effect" of a price change, and why this might be relevant when measuring the impact of inflation for individual consumers?arrow_forwardTo find the average inflation rate, how can we establish the equivalence?arrow_forwardIf the government is concerned about high inflation, it will likely implement some sort ofarrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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