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Author Question: What, if any, is the impact of the CPI bias on government spending? What will be an ideal ... (Read 43 times)

fagboi

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on: Jun 29, 2018
What, if any, is the impact of the CPI bias on government spending?
 
  What will be an ideal response?

Question 2

A graph shows the wages of factory workers. The slope of the line is positive for periods when the wage rate is
 
  A) falling.
  B) rising.
  C) high but not rising any higher.
  D) low.


ally

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Reply #1 on: Jun 29, 2018
Answer to Question 1

About one-third of government outlays, such as Social Security, are linked to the CPI so that these sources of government spending increase when the CPI increases. Because the CPI overstates the actual inflation rate, government spending increases by more than is warranted by inflation. Hence the CPI bias increases the amount of government outlays.

Answer to Question 2

B


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