Mostly summarized from Gregory Mankiw’s Principles of Economics, 5 th Ed. PART 8 The Data of Macroeconomics Chapter 24 of 36 Measuring The Cost of Living Section 12 of 16 … Once we are able to measure historical price and inflation levels we can compare dollar figures of different years. How does Babe Ruth’s 1931 salary of $80,000 compare to current players’ salaries? To compare Ruth's salary to salaries of today's players we need to inflate Ruth's salary to convert 1931 dollars into today's dollars. Using inflation data we can find since 1931 the overall level of prices has risen by 13.6 times. So, Ruth's 1931 salary in 2007 dollars is $80,000 x 13.6 = $1,088,000 This is less than a quarter of today’s median Yankee salary, and only 4% of the league’s highest salary paid to Alex Rodriguez. Various forces have substantially raised the salaries of the best athletes including overall economic growth and increasing income shares shifted from own...
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Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 8 The Data of Macroeconomics Chapter 24 of 36 Measuring The Cost of Living Section 9 of 18 … (This article here in chapter) An Inflation Debate Brews over Intangibles at the Mall, by Timothy Aeppel Accounting for Quality Change. Behind every macroeconomic statistic are thousands of individual data pieces, and a few key judgments. To most people, when the price of a 27-inch television set remains $329.99 from one month to the next, the price hasn't changed. But not to Tim LaFleur. He's a commodity specialist for televisions at the Bureau of Labor Statistics, the government agency that assembles the Consumer Price Index (CPI). In this case, which landed on his desk last December, he decided the newer set had important improvements, including a better screen. After running the changes through a complex government computer model, he determined the improvement in the screen was valued at more than $135. ...
What is the Bond Market? First watch this video “Intro To the Bond Market” https://www.youtube.com/watch?v=O7ww0gQwuhI … (transcript of video) Most individuals who want a loan borrow money from a bank. But for a well-known corporation like Starbucks, borrowing money may be available through another type of financial intermediary: the bond market. A bond is essentially an IOU. It documents who owes and gets paid how much and when payments must be made. Like stocks, bonds are traded on markets. For an established company like Starbucks, investors know enough about the company so they're willing to bypass the bank intermediary and lend directly to the company by buying their bonds. … For a large company with a good reputation this can mean they can borrow money on better terms, at a lower interest rate, from the bond market than they can borrowing from a bank. For example Starbucks has issued over a billion dollars of corporate bonds over the years to fund their expansion plans. Unl...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 8 The Data of Macroeconomics Chapter 24 of 36 Measuring The Cost of Living Section 8 of 18 … Three widely acknowledged difficult to solve problems with the consumer price index (CPI) are -1- Substitution bias -2- Introduction of new goods bias -3 - Unmeasured quality change bias … -3 - Unmeasured quality change bias If the quality of a good increases from one year to the next and its price remains the same, the value of a consumer’s dollar increases because you are getting a better good for the same money. The Bureau of Labor Statistics (BLS) attempts to account for quality change when the quality of a good in the basket changes. In effect, the BLS tries to compute the price of a constant-quality basket of goods. Quality changes are problematic because dollar value of the changes is hard to measure. … Among economists there is much on-going debate over how severe these three measurement problems are and how ...
From San Fransicko - Why Progressives Ruin Cities. Michael Shellenberger. 2021. Kindle online sample. Section 1. From introduction: Progressives claimed they knew how to solve homelessness, inequality, and crime. But IN CITIES THEY CONTROL, PROGRESSIVES MADE THOSE PROBLEMS WORSE. Michael Shellenberger has lived in the San Francisco Bay Area for thirty years. During that time, he advocated for the decriminalization of drugs, affordable housing, and alternatives to jail and prison. But as homeless encampments spread, and overdose deaths skyrocketed, … Shellenberger decided to take a closer look at the problem. What he discovered shocked him. THE HOMELESSNESS, INEQUALITY, AND CRIME PROBLEMS HAD GROWN WORSE NOT DESPITE BUT BECAUSE OF PROGRESSIVE POLICIES. San Francisco and other West Coast cities — Los Angeles, Seattle, Portland — had gone beyond merely tolerating homelessness, drug dealing, and crime to actively enabling them. … San Fransicko reveals the underlying problem isn’t a l...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 8 The Data of Macroeconomics Chapter 24 of 36 Measuring The Cost of Living Section 7 of 18 … Three widely acknowledged difficult to solve problems with the consumer price index (CPI) are -1- Substitution bias -2- Introduction of new goods bias -3 - Unmeasured quality change bias … -2- Introduction of new goods bias When a new good is introduced consumers have more variety of choice which reduces cost of maintaining the same economic well-being level. Suppose you could choose between a $100 gift certificate at a large store that offered a wide variety of goods or a $100 gift certificate at a small store with same prices but a smaller variety. Most people would pick the store with greater variety because they can chose the product closer to their exact desire or choose to try a new brand for enjoyment of variety. In effect the increased set of possible choices makes each dollar more valuable. This is also...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 8 The Data of Macroeconomics Chapter 24 of 36 Measuring The Cost of Living Section 6 of 18 … Table A here … The consumer price index (CPI) is used for measuring changes in the cost of living. The CPI determines how much incomes must rise to maintain a constant standard of living. Three problems with calculating the CPI are -1- substitution bias -2- introduction of new goods bias -3 - unmeasured quality change bias … -1- Substitution Bias When prices change each year they all do not change proportionately, some prices rise more than others Consumers respond to these unequal price changes by · buying less of the goods whose prices have risen · buying more of the goods whose prices have risen less or fallen If a price index is computed assuming a fixed basket of goods, it · ignores consumer substitution · overstates the yearly cost of living increase … Consider a situation of a basket of apples and pears,...