Question: 8. In explaining why it is a costly mistake to have the CPI overestimate inflation, the Associated Press (20 October 1994) reported, Every 1 percentage

8. In explaining why it is a costly mistake to have the CPI overestimate inflation, the Associated Press (20 October 1994) reported, “Every 1 percentage point increase in the CPI raises the federal budget deficit by an estimated $6.5 billion.”

Explain why that would happen.

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