Saturday, June 20, 2015

Chapter 11 Reflection

     A single person cannot change the rate of inflation with what they purchase because with using the CPI it is looking at how much goods are changing in price and what the majority of people are buying. So if only a few people are changing what they are purchasing for a better alternative the CPI will most likely not change because a majority of the people are still purchasing the original. As well over time the CPI continues to get more and more out of date and therefore is overstating the rate of inflation.
     Yes the improvement in goods causes more distortion in the CPI as you look at how much cars have improved from the 1980's to today you can see how many more options are available in comparison. In turn a car in the 1980's was much cheaper than a car today but when you look at all of the features that come with a new car and how much they cost it makes the price between the two not look quite as bad.

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