The key reason that the Laspeyres price index tends to overstate the impact of price changes on consumers is that it:
A) only accounts for price increases and ignore price decreases.
B) measures prices two periods after the actual price changes occurred.
C) ignores the possibility that consumers alter their consumption as prices change.
D) All of the above are correct.
E) none of the above
C
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The theory of consumer demand
a. can be used to explain how an individual allocates time between two competing uses b. is valid only for choices among various physical goods c. is valid only for goods and services purchased for cash d. is valid only if consumers are perfectly rational e. can explain the demand for normal goods, but not the demand for inferior goods
If a country is an exporter of a good, then it must be the case that
a. the world price is less than its domestic price. b. consumer surplus is higher than a no trade situation. c. the world price is greater than its domestic price. d. they used an infant-industry argument to protect its producers.
The average tax rate is defined as
A) total tax due/change in taxable income. B) total tax due/total taxable income. C) change in taxes due/change in taxable income. D) change in taxes due/total taxable income.
If the Fed is trying to make the interest rates go down, it wants:
A. The money supply to decrease B. The price level to decrease C. Unemployment to decrease D. Investment to decrease