For each city across the U.S., economists construct a price index for a similar basket of goods. In Los Angeles the index is 127.3 and the index for Dallas is 94.8
If you have been offered $137,000 for a job in Los Angeles and $117,000 for a similar job in Dallas, which job affords you the highest purchasing power of the bundle of goods in the price index? Use the Los Angeles value as the base.
Real value[Dallas] = 127.3($117,000)/94.8 = $157,111. This exceeds the real $137,000 salary for the job in Los Angeles. The Dallas job provides higher purchasing power.
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Which of the following is a major category for the Consumer Price Index?
A. capital goods B. recreation C. intermediate goods D. money
The "marginal rate of substitution" between two goods is measured by:
A) the ratio of the market prices of the two goods. B) the number of units of a good consumed divided by the market price of the other good. C) the number of units of one good a consumer would give up to consume one more unit of another good, while holding total utility constant. D) the consumer's budget constraint divided by the price of each good.
Assuming that the average duration of its assets is five years, while the average duration of its liabilities is three years, then a 5 percentage point increase in interest rates will cause the net worth of First National to decline by ________ of
the total original asset value. A) 5 percent B) 10 percent C) 15 percent D) 25 percent
Unemployment caused by a recession is called:
a. structural unemployment. b. frictional unemployment. c. involuntary unemployment. d. cyclical unemployment