Explain how the CPI underestimates inflation with respect to college tuition
What will be an ideal response?
The market basket used by the Bureau of Labor Statistics when calculating the CPI puts a weight of only 1.7% on college tuition and fees, but families with college students spend much more than 1.7% of their budgets on college tuition. The BLS estimates that the cost of tuition and other school fees rose about 500% from the CPI's base year (1982-1984), while the overall CPI rose about 125% over the same period.
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Consider a tax cut which affects not only consumer disposable income, but also after-tax earnings from labor supplied to labor markets and from financial assets acquired through saving. In the long run we would expect this tax cut to
A) increase both the price level and the level of real GDP. B) decrease both the price level and increase real GDP. C) increase the price level. D) increase the level of real GDP.
If the demand curve for X has twice the elasticity of the demand curve for Y, then for the same percentage decrease in price, the percentage increase in the quantity of X demanded would be twice that for Y
a. True b. False Indicate whether the statement is true or false
You agree to lend a friend $20,000 for a year at an annual interest rate of 45%. At the end of the year your friend must pay you ________ in interest.
A. $133 B. $750 C. $1,900 D. $9,000
If the demand curve for a firm's output is P=200-10Q, the total revenue curve will be
A. TR=200Q-200Q2. B. TR=10P*Q. C. TR=200Q-10Q2. D. TR=200-2Q.