Which of the following would be a consequence of substitution bias in the CPI?
A) Judges would award child support payments that would not adequately keep up with the true cost of inflation.
B) Businesses would overcompensate employees for inflation when giving cost of living raises.
C) Social Security payments would not adequately compensate retired workers for inflation.
D) The inflation rate based on the CPI would underestimate the true level of inflation.
B
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The money demand curve shifts to the right when
a. there is an increase in the riskiness of interest-bearing assets. b. there is a decrease in the interest rate. c. income decreases. d. income increases. e. both a and d.
When government action is justified based on the argument that everyone agrees to be coerced _____
a. we cannot be sure that everyone is in favor of the action b. the same justification is true of market exchange c. we can be sure that the current state of affair is Pareto efficient d. the private interest becomes the public interest