Chapter 9: Q 20. (page 243)
What is indexing?
Price index is an indicator that shows changes in the price level of a select basket of goods. Its a financial tool used to make policies.
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Who in an economy is the big winner from inflation?
What is deflation?
If inflation rises unexpectedly by 5%, would a state government that had recently borrowed money to pay for a new highway benefit or lose?
If inflation rises unexpectedly by , indicate for each of the following whether the economic actor is helped, hurt, or unaffected:
a. A union member with a COLA wage contract
b. Someone with a large stash of cash in a safe deposit box.
c. A bank lending money at a fixed rate of interest.
d. A person who is not due to receive a pay raise for another months.
Given the federal budget deficit in recent years,
some economists have argued that by adjusting Social Security payments for inflation using the CPI, Social Security is overpaying recipients. What is their argument, and do you agree or disagree with it?
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