The CPI assumes a fixed basket of goods over time. In fact, consumers are likely to change purchasing behavior over time by purchasing less of the goods whose prices have risen by relatively large amounts and by buying more of the goods whose prices have risen less or maybe even fallen. What problem does this cause for measuring the cost of living?
This creates a substitution bias in the calculation of a price index with a fixed basket of goods.
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If the money supply expands to much it lowers the value of the dollar?
Indicate whether the statement is true or false
Refer to the above graph. Which of the following movements would indicate an increase in employment?
From point D to point G From point C to point D From point E to point D From point F to point E
A possible market solution that a reputable firm can engage in when faced with the lemons problem is
A) to offer a warranty. B) to engage in externalities. C) to create asymmetric information. D) to use average cost pricing.
In the "non-market-clearing model" the level of final goods sales and unemployment during a recession are
A) the result of interactions between supply and demand. B) higher than would be the case in a market clearing model. C) caused by the rapid adjustment of prices and wages. D) the result of wage and price rigidities.