Which of the following would be a consequence of substitution bias in the CPI?
A) Social Security payments would not adequately compensate retired workers for inflation.
B) Businesses would overcompensate employees for inflation when giving cost of living raises.
C) The inflation rate based on the CPI would underestimate the true level of inflation.
D) Judges would award child support payments that would not adequately keep up with the true cost of inflation.
Answer: B
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Alternate Outputs from One Day's Labor Input: United States: 12 bushels of wheat or 3 yards of textiles. Great Britain: 3 bushels of wheat or 12 yards of textiles. From the data above, the United States
a. has an absolute advantage over Great Britain in the production of textiles. b. has an absolute advantage over Great Britain in the production of wheat. c. has a comparative advantage in the production of textiles d. should export textiles to Great Britain.
The larger the simple deposit multiplier,
A) the higher the required reserve ratio. B) the higher the discount rate. C) the larger the change in the money supply for a given change in deposits. D) the less likely the Fed will be to use its monetary policy tools.
The Fed can decrease the money supply by conducting open-market
a. sales or by raising the discount rate. b. sales or by lowering the discount rate. c. purchases or by raising the discount rate. d. purchases or by lowering the discount rate.
A shift from S1 to S2 reflects the change that happens when a negative externality is taken into account. A shift from D1 to D2 reflects the change that happens when a positive externality is taken into account.Refer to the above figures. A positive externality exists that has not been corrected. Price and quantity will be
A. P1 and Q1. B. P2 and Q2. C. P3 and Q3. D. P4 and Q4.