How will the following affect the reliability of a consumer price index if the consumer price index's base year hasn't changed in 25 years? a . Consumers collect and use frequent-flyer miles to buy airline tickets. b. Legislation passes that allows
consumers to request generic instead of name brand drugs. c. Old camcorders have black and white viewfinders, while newer models have color viewfinders.
a . The use of frequent-flyer miles lowers the cost of flying. If the CPI fails to take greater use of frequent-
flyer miles into account, then it will overstate the cost of living.
b. Consumers use less expensive generic drugs to lower the cost of prescriptions. If the CPI fails to take
the prices of generic drugs into account, then it will overstate the cost of living.
c. The quality of camcorders has increased over time. If the CPI fails to consider quality improvements,
then it will overstate the cost of living.
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The elasticity of demand for a project is -1.5. This means that a 30 percent increase in the quantity of the good is caused by a
A. 20 percent increase in the price of the good. B. 2 percent increase in the price of the good. C. 20 percent decrease in the price of the good. D. 15 percent decrease in the price of the good.
If a firm finds itself at an output level where MR < MC, then the firm
A. should shut down, since it is losing money. B. should decrease output. C. should increase output. D. should raise the price of its product.
A factor increasing the popularity of monetarism in the late 1970s was the
A. ease with which the Fed controlled the money supply. B. excellent performance of the economy in the 1970s. C. fear of budget deficits and growing federal debt. D. predictable behavior of velocity until about 1980.
The components of the expenditure approach to measuring GDP include all of the following EXCEPT
A. expenditures for business investments. B. net exports. C. the implicit payments for unpaid household work. D. government purchases of goods and services.