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CAS EC 102 (215)


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CAS EC 102
Jay Zagorsky

Lecture Thursday, February 20, 2014 3:29 PM WSJ: "Facebookto Pay $19 Billion for WhatsApp" and "Thousands Flock to Kiev to Shore Up Protests" Trouble in Ukraine - One of the major places where wheat is grown in the world and large producer of steel pipes and machinery - Because world economyis connected, if Ukraine goes under, the prices of wheat and steel will spike up - President Yanukovych was faced with an economicchoice ○ Sign trade agreement with European Union or trade primarily with Russia  Stayed with Russia, which started a protest - Ukrainians are upset because the other former satellite countries are doing better economically ○ Large inequalities and inefficient economy Prices Part II - Does the CPI misstate inflation? ○ Accurate measure of selected goods of a typical bundle but, it is not a perfect measure of the cost of living  Deliberate lying □ Autocratic regimes prop themselvesby releasing false economicindicators  Example: Soviet Union before the collapse in 1980swhich understated inflation  Outlet bias □ US shoppers over time are buying more warehouse stores  Exclusionary due to membership  Large amounts makes it hard to combining the prices with general prices even though they have lower inflation  New goods □ The basket does not reflect
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