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 that the inflation rate is 3 percent for each of the next four years), find the minimum wage for 2010, 2011, and 2012.
b. If the CPI overstates inflation by 1 percentage point, calculate a revised minimum wage for each year 2010 to 2012 removing the CPI bias.
c. How much does the CPI bias affect the minimum wage in 2010, 2011, and 2012?

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The Answer of 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 that the inflation rate is 3 percent for each of the next four years), find the minimum wage for 2010, 2011, and 2012.
b. If the CPI overstates inflation by 1 percentage point, calculate a revised minimum wage for each year 2010 to 2012 removing the CPI bias.
c. How much does the CPI bias affect the minimum wage in 2010, 2011, and 2012?

Suppose in 2009 the United States Congress Passes a Minimum