First, answer two of the following questions - be sure to answer thoroughly, as I would like to pick this up for a homework grade.
1. Explain how the current US tax system levies taxes on capital gains and earned interest. What does this mean for the costs of inflation?
2. Does inflation always cause workers losses due to decreases in real wages? Why or why not?
3. What is a GDP deflator? Why do some economists consider the GDP deflator to be a better measure of overall inflation than CPI?
Second, take a look at the latest CPI statistics at the BLS website and come prepared to discuss. Read especially the sections explaining how CPI is calculated and at changes over the past few years.
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