The CPI overstates inflation because the average consumer buys
A) less of those goods whose relative price has risen.
B) more of those goods whose relative price has risen.
C) lower quality goods if they have a choice.
D) the same basket of goods every week.
E) a generally random assortment of goods and services each week because what is purchased depends on what the consumer needs.
A
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Starting from a long-run equilibrium, an increase in potential output leads to ________ gap in the short run and to ________ rates of inflation in the long run.
A. a recessionary; lower B. an expansionary; lower C. an expansionary; higher D. a recessionary; higher
Which of the following will not cause a demand curve to shift position?
a. A doubling of the good's price. b. A doubling of the price of a closely substitutable good. c. A doubling of income. d. A shift in preferences. e. A doubling of both the price of X and the price of Y.
Suppose a consumer purchases pizza and soft drinks. If pizza is measured on the vertical axis and soft drinks are measured on the horizontal axis, then the slope of the budget line is equal to:
A. the price of pizza divided by the price of soft drinks. B. the price of soft drinks divided by the price of pizza. C. the price of pizza divided by the price of soft drinks times negative one. D. the price of soft drinks divided by the price of pizza times negative one.
When people mistake changes in nominal prices for changes in real prices, what has occurred?
A. Money confusion B. Price illusion C. Price confusion D. Money illusion