"The new goods bias puts a downward bias into the CPI and its measure of the inflation rate." Is the previous sentence correct or not? Explain your answer
What will be an ideal response?
The sentence is false because the new goods bias puts an upward bias into the CPI and its measure of the inflation rate. The new goods bias occurs when new, higher quality and more expensive goods replace older, lower quality and less expensive goods. Part of the expense of the new goods is to pay for the higher quality of the new goods. But, if the price is not adjusted (downward) to take account of the higher quality, incorporating the new good into the CPI leads to an upward bias in the prices that go to make up the CPI and hence also an upward bias in the inflation rate.
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Which of the following is true?
A) The income per worker of a country is higher than its income per capita. B) The income per worker of a country increases when the amount of capital available in the country diminishes. C) The income per worker of a country is lower than its income per capita. D) The income per capita of a country increases when there is an increase in the number of workers.
Suppose the current equilibrium wage rate for housekeepers is $8.60 per hour. An increase in the minimum wage to $7.50 per hour leads to
A) a surplus of housekeepers. B) a shortage of housekeepers. C) no change in the market for housekeepers. D) an increase in the quantity of housekeepers supplied. E) unemployment of housekeepers.