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Issues in Economics Today
Issues in Economics Today
Robert Guell, Indiana State University

Overstatement of the Cost of Living by the CPI

Web-Based Issues Questions

Question 13.1

Click on this link

http://www.bls.gov/cpi/

Note that the data in the “Latest Numbers” section are expressed in non-seasonally adjusted (NSA) terms and seasonally adjusted (SA) terms. This accounts for the fact that some goods (like fruits and vegetables) are always less expensive when they are in season. Which other non-food items might predictably cost more at some points in the year than others? Why would this be important?

Question 13.2

Click on each of these articles.

http://www.heritage.org/library/backgrounder/bg1177.html

http://www.brook.edu/dybdocroot/views/testimony/triplett/19980429.pdf

Note that these papers come from research institutions with vastly different political viewpoints but come to a similar conclusion; the CPI is flawed. Given this, and given the consequences of fixing the CPI expressed in the text (higher taxes, lower Social Security benefits) which of the concerns, accuracy or fairness, is more important.





McGraw-Hill/Irwin