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Category: Economics
Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected.a. Is the real interest rate on this loan higher or lower than expected? Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to...
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Category: Economics
The chapter explains that Social Security benefits are increased each year in proportion to the increase in the CPI, even though most economists believe that the CPI overstates actual inflation.a. If the elderly consume the same market basket as other people, does Social Security provide the elderly with an improvement in their standard of living e...
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Category: Economics
Suppose that the year you were born someone bought $100 of goods and services for your baby shower. How much would you guess it would cost today to buy a similar amount of goods and services? Now find data on the CPI and compute the answer based on it. (You can find the BLS's inflation calculator here: http:// www.bls.gov/data/inflation_calculator....
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Category: Economics
If the price of imported French wine rises, is the CPI or the GDP deflator affected more? Why?  
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Category: Economics
Describe the three problems that make the CPI an imperfect measure of the cost of living.  
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