B- Measuring the Cost of Living

1. What are the costs of inflation? Why do you think it is important to monitor inflation and keep it in check? Please respond substantially, with pertinent examples.
2. Describe the three problems that make the CPI an imperfect measure of the cost of living.
3. Inflation during the 1970s was much higher than most people had expected when the decade began. How did this unexpectedly high inflation affect homeowners who obtained fixed-rate mortgages during the 1960s? How did it affect the banks that lent the money?