Briefly explain how the increase in the cost of health care might partially be a measurement problem due to changing quality of care.
What will be an ideal response?
Part of the increase in health care costs over the last couple of decades may be a
measurement problem. In particular, CPI (the consumer price index, which measures
the inflation rate) might overestimate the increase in the price of health care because it
might not adequately account for improvements in the quality of health care. A heart
surgery today is drastically different from one 25 years ago, with fewer complications
and a longer and higher-quality life after the operation. In other words, we are not
merely paying more for the same service, we are paying more for a better service.
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When the financial crisis started in August 2007, inflation was rising and the Fed began an aggressive easing lowering of the federal funds rate, which indicated that
A) the Fed pursued an autonomous monetary policy tightening. B) the Fed pursued an autonomous monetary policy easing. C) the Fed had an automatic negative response to inflation based on the Taylor rule. D) the Fed had an automatic positive response to inflation based on the Taylor rule.
Recall the Application about the Fed's response to the collapse of the investment house Bear Stearns as well as its handling of the 2008 financial crisis with respect to other financial institutions to answer the following question(s). According to this Application, the Fed responded to the financial crisis by continuing to develop new programs. One example of this was its announcement that it would now purchase commercial paper, which is the short-term debt of corporations. This is an example of the Fed acting as a:
A. medium of exchange. B. lender of last resort. C. store of value. D. unit of account.
If the measured elasticity of supply coefficient equals 0.6, then supply is: a. perfectly elastic. b. elastic
c. unit elastic. d. inelastic.
Human beings
A) have unlimited wants.
B) think they have unlimited wants, but really have limited needs.
C) have limited wants, but unlimited needs.
D) know what their needs are, but do not know what their wants are.