Product innovation:
A. is accurately reflected in the basket of goods.
B. is not an issue for the CPI since it uses a fixed basket of goods and services.
C. doesn't cause the CPI to be overestimated.
D. presents a problem for those calculating the CPI because they use a fixed basket of goods.
Answer: D
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If the price level decreases, then the aggregate expenditures schedule will shift and this translates into a ________.
A. shift in aggregate demand to the right B. shift in aggregate demand to the left C. movement up along the aggregate demand curve D. movement down along the aggregate demand curve
A bank's reserves
A) can be held as deposits with the Federal Reserve. B) are the sum of its excess and required reserves. C) can be held as cash in its vault. D) all of the above.
A consequence of the CPI bias is that it
A) decreases government outlays. B) reduces outlet substitution bias. C) means that it is impossible to measure the inflation rate. D) increases international trade. E) distorts private contracts.
Among the following people, who earns a profit?
a. a construction worker who would work for $40 per hour but actually earns $50 per hour b. a heart surgeon who earns $400,000 a year c. an entrepreneur who earns $25,000 a year d. a land owner who receives $600 per acre for the 1,000 acres he owns e. a homemaker whose work is valued at $100,00 a year even though she earns $0