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Author Question: Why does the substitution bias cause the consumer price index to overstate inflation and the cost of ... (Read 89 times)

kfurse

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Question 1

Figure 9-1











Refer to Figure 9-1. Based on the graph of the labor market above, if a minimum wage is set at $5 per hour, which of the following will occur?


◦ The unemployment rate will rise.
◦ The unemployment rate will fall.
◦ The level of unemployment will rise, but the percentage of the labor force unemployed will not change.
◦ None of these will occur.

Question 2

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?



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Marked as best answer by kfurse on Mar 16, 2019

BUTTHOL369

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kfurse

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Reply 2 on: Mar 16, 2019
YES! Correct, THANKS for helping me on my review


DylanD1323

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Reply 3 on: Yesterday
Great answer, keep it coming :)

 

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