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ECON 1BB3 (535)
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Should I spend my money now.docx

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Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy
Semester
Fall

Description
Should I spend my money now, or save it for a rainy day? 10/3/2012 9:27:00 AM Using CPI Ex. your father earned 40,000 in 1982. What is this salary worth in 2012 dollars? CPI (1982)- 61.8 CPI (2012)- 116.3 ANSWER: 61.8 = 40,000 116.3 x x= 116.3 x 40,000=75,275 61.8 indexing- OAS(old age security) + CPP (Canadian pension plan) both transfer payments. Indexing means that it would go up as the inflation goes up. Problems with CPI: 3 problems with cpi…  1. Substitution bias- ignores consumer substitution; overstates inflation.  2. Introduction of new goods- CPI is based on a fixed basket of goods and services; overstates inflation.  3. Unmeasured Quality change- some price changes reflect quality improvements; overstates inflation CPI vs GDP Deflator-  1. CPI- goods and services bought by typical consumers GDP deflator- r
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