An example of the outlet substitution bias in the calculation of the CPI is a price increase in
A) a trip to Mexico for a couple that had previously taken vacations in Europe.
B) a 2014 Honda Civic relative to a 2004 Honda Civic.
C) GPS units versus AAA map books.
D) textbooks bought through the campus bookstore relative to textbooks via Craigslist.
E) olive oil versus vegetable oil.
D
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In the Wealth of Nations, Adam Smith wrote about how countries could increase their consumption of goods and services through specialization and trade with other countries.
Answer the following statement true (T) or false (F)
Suppose the natural unemployment rate is 4 percent and the expected inflation rate is 6 percent. In the figure below, illustrate the long-run Phillips curve
What does the long-run Phillips curve reveal abut the long-run tradeoff between inflation and unemployment?
If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:
A. increase the quantity demanded by about 2.5 percent. B. decrease the quantity demanded by about 2.5 percent. C. increase the quantity demanded by about 25 percent. D. increase the quantity demanded by about 250 percent.
Refer to the graph below, which shows an aggregate demand curve. If the price level decreases from 200 to 100, the real output demanded will:
A. Increase by $800 billion
B. Increase by $200 billion
C. Decrease by $600 billion
D. Decrease by $200 billion