If the Fed wanted to target price stability, meaning zero inflation, why should it set a target rate of inflation of around one percent?
What will be an ideal response?
Economists maintain that the CPI, which is a common measure of inflation, overstates the true rate of inflation by as high as one percentage point per year. This is primarily due to the fact that the CPI is measured using a fixed basket of goods and does not reflect the fact that consumers can substitute away from higher priced goods towards less expensive substitutes and that quality improvements are not always adjusted for, so what looks like a higher price may simply be an improvement in quality.
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Which of the following is NOT one of the three primary sources of private investment funds flowing into developing nations?
A) portfolio investment B) bank loans C) World Bank and IMF loans D) foreign direct investment
Which of the following statements is correct?
A) The depth and the length of all business cycles are identical. B) The depth and the length of all business cycles are different. C) Business cycles are caused by seasonal unemployment changes. D) Business cycles are caused by unanticipated inflation.
Suppose the market supply is initially at S1 and a price ceiling is set at 8. If supply shifts from S1 to S2, then
A. The price ceiling will no longer bind.
B. The price ceiling will prevent output from changing.
C. The size of the shortage will increase.
D. The market will not reach equilibrium.
Economists call the pursuit of a transfer of wealth through government at someone else's expense:
A. the paradox of voting. B. adverse selection. C. rent-seeking behavior. D. the benefits-received principle.