+ 1-888-787-5890  
   + 1-302-351-4405  
 
 
 
 

Essay/Term paper: Inaccuracies of the consumer price index (cpi)

Essay, term paper, research paper:  Economics

Free essays available online are good but they will not follow the guidelines of your particular writing assignment. If you need a custom term paper on Economics: Inaccuracies Of The Consumer Price Index (CPI), you can hire a professional writer here to write you a high quality authentic essay. While free essays can be traced by Turnitin (plagiarism detection program), our custom written essays will pass any plagiarism test. Our writing service will save you time and grade.



Inaccuracies of the Consumer Price Index (CPI)


The Consumer Price Index is a measure of the prices of a fixed market
basket of some 300 consumer goods and services purchased by a "typical" urban
consumer. The 1982-1984 period serves as the base period so analysts can compare
other year's changes with this base period. The composition of the market
basket is fixed in the base period and is assumed not to change from one period
to another. The reason for the assumption is because the CPI measures the
costliness of a constant standard of living. Critics claim that the CPI is
inaccurate because it overstates the increases in the cost of living. For this
reason, the CPI has been said to be inaccurate.
First, consumers do change their spending patterns. Even though the
composition off the market basket is assumed not to change, it does because
consumers change their spending patterns. Because consumers substitute lower
priced products in lieu of higher priced ones, the weight has shifted. The CPI
assumes that this does not occur and therefore it overcompensates the standard
of living.
Secondly, because the base period was over a decade ago, the quality of
the products has increased significantly, and therefore the prices should be
higher. The CPI, however, assumes that the increases in prices is a result of
inflation rather than quality improvements which is false. Here also, the CPI
overstates the rate of inflation.
Many consumers do not mind the overcompensation of the CPI because in
most cases it means more money in their pockets, but there are some consequences.
This may cause an ongoing inflation trend. The reason why the government does
not restrict it is because they are worried about getting re-elected. Even if
the President does call for a revision of the CPI, Congress would defeat it to
keep their positions.
Another consequence of the overstated CPI involves the adjustment of tax
brackets. Their intent of indexing is to prevent inflation to cause people to be
placed into a higher tax bracket. For example, if your income increases by 10%,
that may put you in a higher level tax bracket, but if product prices have also
increased by 10%, your real income has remained constant. This would transfer
money from taxpayers hands to the Federal Government. However, indexing will
tend to reduce the Federal Government's share by raising the levels of the tax
brackets. Therefore, more money will stay in the people's hands due to indexing.
The only party that seems to be hurting as a result of the
overcompensation of the CPI is the Federal Government. Because consumers are the
ones that are being affected, they control the CPI as opposed to the Federal
Government.

 

Other sample model essays:

The Cost Of Buying A Used Car This project has been put together to show the cost of buying and using a used car for one year. To show the different costs for cars I have made a chart on ...
Russia' Economic Transition In August of 1991, the collapse of the communist system in the USSR and it's neighboring republics occurred. Out of the smoke emerged fifteen new republi...
The Debt: An Economic Catastrophe Few national economic issues have generated the same kind of concern as has the federal debt problem of Canada. There is a pressing need for long-term polici...
The Economic Impact of The New Telecommunications Legislation By: David Lister Canada has been transformed in recent years into an information based society. Nearly half of the labour forc...
The Economics of Federal Defense Policy Three out of four Americans polled in the 1992 election year believed that the United States was heading in the wrong direction. With such an overwhelmi...
Economics / The Combines Act
The Combines Act J.C.H. Jones's article "The Economics of the National Hockey League" (1969) purpose is to explain through simple micro economics that the prime motive of professional hockey ...
The Economics of The Clean Air Act Air is a part of all of our lives. Without clean air, nothing we know of can exist. The debate over clean air, it's regulations, their teammates and o...
Economics / U.S. Wage Trends
U.S. Wage Trends The microeconomic picture of the U.S. has changed immensely since 1973, and the trends are proving to be consistently downward for the nation's high school graduates and high...
The Effects of Stress, Alcohol Outcome Expectancies, Gender, Coping Styles, and Family Alcoholism on Alcohol Consumption Research Proposal by Josh Robbins 100-928-5...
The Fed and Interest Rates Dave Pettit of The Wall Street Journal writes a daily column that appears inside the first page of the journal's Money & Investment section. If the headl...
Experience with Dream Essay - Reliable and great customer service. Quality of work - High quality of work.
, ,
Dream Essay - Very reliable and great customer service. Encourage other to try their service. Writer 91463 - Provided a well written Annotated Bibliography with great deal of detail per th
, ,
it is always perfect
, ,
The experience with Dream Essay is stress free. Service is excellent and forms various forms of communication all help with customer service. Dream Essay is customer oriented. Writer 17663
, ,
Only competent & proven writers
Original writing — no plagiarism
Our papers are never resold or reused, period
Satisfaction guarantee — free unlimited revisions
Client-friendly money back guarantee
Total confidentiality & privacy
Guaranteed deadlines
Live Chat & 24/7 customer support
All academic and professional subjects
All difficulty levels
12pt Times New Roman font, double spaced, 1 inch margins
The fastest turnaround in the industry
Fully documented research — free bibliography guaranteed
Fax (additional info): 866-332-0244
Fax (additional info): 866-308-7123
Live Chat Support
Need order related assistance?—Click here to submit a inquiry
© Dreamessays.com. All Rights Reserved.
Dreamessays.com is the property of MEDIATECH LTD