This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Explain how inflation can lead to distortions. What will be an ideal ... (Read 152 times)

B

  • Hero Member
  • *****
  • Posts: 570
on: Jun 30, 2018
Explain how inflation can lead to distortions.
 
  What will be an ideal response?

Question 2

Will the CPI and GDP deflator always move together? Explain.
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

AngeliqueG

  • Sr. Member
  • ****
  • Posts: 343
Reply #1 on: Jun 30, 2018
Answer to Question 1

First, not all prices and wages adjust automatically when inflation occurs. Second, variations in relative prices (which occur when there is not pure inflation) can lead to uncertainty. Inflation can also lead to distortions if the tax system is not adjusted when inflation occurs (e.g. nominal income tax brackets).

Answer to Question 2

No they will not. Some of the goods included in the GDP deflator (some investment goods) are not included in the CPI. Some of the goods included in the CPI (foreign goods) are not included in the GDP deflator.


B

  • Member
  • Posts: 570
Reply 2 on: Jun 30, 2018
Excellent

bassamabas

  • Member
  • Posts: 294
Reply 3 on: Yesterday
Wow, this really help

« previous next »
 

Did you know?

Chronic marijuana use can damage the white blood cells and reduce the immune system's ability to respond to disease by as much as 40%. Without a strong immune system, the body is vulnerable to all kinds of degenerative and infectious diseases.

Did you know?

More than 30% of American adults, and about 12% of children utilize health care approaches that were developed outside of conventional medicine.

Did you know?

Multiple experimental evidences have confirmed that at the molecular level, cancer is caused by lesions in cellular DNA.

Did you know?

Patients who have been on total parenteral nutrition for more than a few days may need to have foods gradually reintroduced to give the digestive tract time to start working again.

Did you know?

Calcitonin is a naturally occurring hormone. In women who are at least 5 years beyond menopause, it slows bone loss and increases spinal bone density.

One Extinction May Lead to Another One Extinction May Lead to Another
Some playgrounds near streets with heavy traffic may still have high levels of lead from gasoline ... Some playgrounds near streets with heavy traffic may still have high levels of lead from gasoline ...
Features of a normal 12-lead ECG. Features of a normal 12-lead ECG.
Symptoms That May Lead to a Diagnosis of Attention Deficit/Hyperactivity Disorder Symptoms That May Lead to a Diagnosis of Attention Deficit/Hyperactivity Disorder
Mechanisms to Explain the Effects of Massage Mechanisms to Explain the Effects of Massage
Gingivitis causes redness and swelling of the gums and can lead to more serious gum disease Gingivitis causes redness and swelling of the gums and can lead to more serious gum disease
Video: Brief Summary on Photosynthesis - Animation

For a complete list of videos, visit our video library