How costly are biases in the CPI?
What will be an ideal response?
Each year the federal government increases Social Security payments to the elderly by the rate of increase of prices as measured by the CPI. Economists believe that the CPI overstates actual price increases by between 0.5% and 1.5% a year. If we assume that the figure is 1%, and use the estimates provided by the Congressional Budget Office, reducing Social Security payments by 1% would save 42 billion dollars over a five-year period!
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The slope of a straight line increases as the numbers on the x-axis become larger
Indicate whether the statement is true or false
Deadweight loss:
A. occurs in markets that are efficient. B. occurs when markets are in equilibrium. C. is the loss in surplus from a market not in equilibrium. D. is additional surplus from an additional market transaction.
By monitoring financial diaries of several of the world's poorest families, economists found that a challenge facing the poor was:
A. they did save any money to pay down debts. B. their income fluctuated a lot, in addition to being low. C. they often did not diversify their savings and had "their eggs all in one basket". D. All of these are true.
Two goods are considered substitutes when the cross elasticity of demand is ___ and complements when the cross elasticity of demand is ___
a. Greater than zero, less than zero. b. Less than zero, greater than zero. c. Greater than one, less than one. d. Less than one, greater than one.