Posted by sally on Saturday, February 27, 2010 at 2:54pm.
Suppose in 2009 the united states congress passes a minimum wage law that increases the minimum wage (the lowest legal wage) to 7.25 per hour and has a provision that increases the minimum wage at the beginning of each year based on the CPI for the previous year.
a.) If the CPI increases 3 percent for each of the next four years (so inflation rate is 3% for each next four years), find the minimum wage for 2010 and 2011.
b.) if the CPI overstates inflation by 1%, calculate a revised minimum wage for each year 2010 to 2011 removing the CPI bias
C.) How much does the CPI bias affect the minimum wage in 2010 and 2011

macroeconomics  Anonymous, Monday, December 8, 2014 at 7:57am
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