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Preface:
In the 1990s politicians in Washington D.C. were looking for ways to balance the budget. Former Federal Reserve Chairman Alan Greenspan brought attention to the importance of the Consumer Price Index (CPI) and its link to cost-of-living adjustments (COLAs) in several areas of the federal budget--most notably Social Security. Alan Greenspan argued that the CPI overstated inflation and thus led to unjustified COLAs. According to Alan Greenspan, these unjustified COLAs therefore increased the deficit, and if the overstatements in the CPI were corrected this would contribute to balancing the budget.
The Senate Finance Committee created the Boskin Commission in the 1990s to examine possible overstatements of the CPI. The commission came out with its estimate that the CPI overstated inflation by 1.1%.
Answer the following questions:
1. If the Boskin Commission's estimate was right and the CPI overstates inflation by 1.1 % every year--what does that say about economic variables and living standards in general in the United States, which are affected by the CPI?
2. What are some of the sources of this possible overstatement of the CPI, which is calculated by the Bureau of Labor Statistics?
explain the difference between demand pull inflation and cost-push inflation illustrating your answer with examples of
If the money supply is growing at a rate of 5 percent per year, real GDP(real output) is growing at a rate of 2 percent per year, and velocity is growing at 2 percent per year instead of remaining constant, what will the inflation rate be? (Enter ..
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Describe the reasons why the governments protect the local industries with restrictions when new markets are emerging or penetrating?
Compare the effect upon a competitive firm's output of a tax of $1 per unit upon output versus a license fee of $200 payable each year regardless of output. Please Clarify.
Briefly discuss the methods traders use in attempting to evade the difficulties they face in markets that involve "Lemons".
How does John Howard's "baby bonus" which consists in providing a lump sum of cash to parents upon the birth of a child will affect WAGES and LABOUR PRODUCTIVITY as well as POTENTIAL GDP and REAL GDP?
Elucidate what would be the budget request for FY13 for this effort.
If foreigorn exchange speculators become more optimistic about the long-run real value of the domestic currency, domestic investment will rise. (Give full explainations for this statement)
It has been suggested that a profit maximizing firm should possess and master an information or knowledge set that includes among many things, the selling price of its output. Explain why this is necessary. Be specific.
Due to low unemployment, firms are having tougher time to find qualified workers. What will be the slope of aggregate supply curve if a country runs out.
As advisors insists that this would not work, another advisor thinks it's good policy. Which advisor is correct.
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