What problems arise from the CPI bias?
What will be an ideal response?
The upward bias in the CPI distorts private contracts and government outlays that include formulas based on CPI change as a measure of inflation. If the intent is to maintain the real value of a payment, indexing payments to the CPI will in fact increase the real value of payments over time if the CPI has an upward bias. In one year, the effect of the bias may not be much, but it will accumulate over time. Close to one third of federal government outlays are indexed to the CPI.
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Refer to the figure below. In this game, how many dominant strategies does Player A have?
A. 0 B. 4 C. 2 D. 1
The bowed production possibilities curve represents: a. constant opportunity costs
b. decreasing opportunity costs. c. increasing opportunity costs. d. none of the above
Reaching an efficient bargain is difficult when the
a. externality is large. b. number of interested parties is large. c. externality is negative. d. government becomes involved.
Which of the following is a final good or service?
A) tires purchased by Ford for use on one of their SUVs B) the new economics textbook you are using C) the hair gels used by a hairstylist at the local hair salon D) the butter used by a chef to make buttercream frosting E) the taco shells purchased by Taco Bell for use in their tacos