What basket of goods is used to construct the CPI?
a. a random sample of all goods and services produced in the economy
b. the goods and services that are typically bought by consumers as determined by government surveys
c. only food, clothing, transportation, entertainment, and education
d. the least expensive and the most expensive goods and services in each major category of consumer expenditures
B
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When attempting to decrease the federal funds rate, the Fed can
A) increase reserve requirements. B) engage in an open market purchase. C) increase the discount rate. D) raise the interest rate paid on bank reserves.
An increase in the price level might cause:
A. a decrease in the quantity of aggregate demand because of the substitution effect. B. a decrease in the quantity of aggregate demand because of the interest rate effect. C. an increase in the quantity of aggregate demand because of the multiplier effect. D. an increase in the quantity of aggregate demand because of the money wealth effect.
Suppose the economy is in long-run equilibrium. If there is an increase in the supply of labor as well as an increase in the money supply, then we would expect that in the short-run,
a. real GDP will rise and the price level might rise, fall, or stay the same. b. real GDP will fall and the price level might rise, fall, or stay the same. c. the price level will rise, and real GDP might rise, fall, or stay the same. d. the price level will fall, and real GDP might rise, fall, or stay the same.
The interest rate effect operates through
A) labor supply. B) government spending levels. C) the purchasing power of individuals' checking accounts. D) credit markets by changing borrowing costs.