The Fed believes there are three advantages to using the personal consumption expenditures (PCE) price index instead of the CPI as a measure of inflation. These advantages include all of the following except
A) the PCE is a chain-type index as opposed to the market-basket approach used for the CPI, and the market-basket approach tends to overstate inflation.
B) the PCE includes the prices of more goods and services than the CPI, so it is a broader measure of inflation.
C) the PCE allows the Fed to better track historical trends in inflation than does the CPI because PCE values can be recalculated as new data becomes available.
D) the PCE includes the value of imported products purchased by consumers , whereas the CPI does not, and imports make up a growing portion of consumer purchases in the United States.
D
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What are automatic stabilizers? How do they affect the budget deficit and/or budget surplus during a recession and during an expansion?
What will be an ideal response?
Consider the two graphs above. Suppose that firms are able to use inventories as collateral for low-interest loans. This would ________ the desired level of inventories, as depicted in graph ________
A) increase; B B) increase; A C) decrease; B D) decrease; A
Which of the following is a definition of the real interest rate in a world with a positive inflation rate?
a. The percentage increase in the borrower's purchasing power from taking a loan b. The percentage decrease in the borrower's dollars from taking a loan c. The percentage increase in the lender's purchasing power from making a loan d. The percentage increase in the lender's dollars from making a loan e. The percentage decrease in the lender's dollars from making a loan
In the United States, the wage premium for college education has been
a. decreasing since 1980. b. increasing since 1980. c. higher for males. d. decreasing since 1990.