A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because
a. producers are likely to change the number of goods they sell from year to year.
b. producers will generally reduce the quality of goods as prices increase over time.
c. consumers will tend to substitute away from goods that become more expensive.
d. consumers will usually reduce their consumption of goods when they become relatively cheaper.
C
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If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?
A) 13 percent B) 30 percent C) 75 percent D) 77 percent
A reverse repurchase agreement of government securities by the Fed
A) permanently increases bank reserves. B) temporarily increases bank reserves. C) permanently reduces bank reserves. D) temporarily reduces bank reserves.
Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________
A) higher; higher B) higher; lower C) lower; higher D) lower; lower
Refer to the information provided in Figure 5.2 below to answer the question(s) that follow.
?Figure 5.2Refer to Figure 5.2. At Point C the price elasticity of demand is -1. Along line segment AB of the demand curve, the demand is
A. unit elastic. B. elastic. C. inelastic. D. either elastic or inelastic, depending on whether price increases or decreases.