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Author Question: Using the CPI to compensate workers for inflation is appropriate because, in the face of a change in ... (Read 53 times)

ss2343

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Using the CPI to compensate workers for inflation is appropriate because, in the face of a change in relative prices, people should be allowed to purchase the same bundle as they did before the price changes.
 
  Indicate whether the statement is true or false

Question 2

Inflation over time necessarily makes consumers worse off.
 
  Indicate whether the statement is true or false



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karlss

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Answer to Question 1

False. This assumes that people would still prefer the original bundle. Because they are facing a new set of relative prices, compensating people so that they could purchase the original bundle will allow them to be able to achieve a higher level of utility than they did before the price changes.

Answer to Question 2

False. Wages also increase over time. Workers may earn the price of some goods in less time than in the past.




ss2343

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Reply 2 on: Jul 1, 2018
Gracias!


epscape

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Reply 3 on: Yesterday
Wow, this really help

 

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