Why do both the chain-weighted index for GDP and the CPI overstate actual price increases?
What will be an ideal response?
Both price indices overstate the actual price inflation experienced by economic agents because quality improvements are difficult to measure. For example, the price of computers may stay the same but one can get more computing power for one's money; thus while the price has remained constant, in some sense it has really fallen, but this is difficult to measure.
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There is greater support for active policymaking when
A) price flexibility is common. B) wage flexibility is common. C) pure competition is widespread. D) none of the above.
A persistent shortage or surplus of a currency under the Bretton Woods system was evidence of
A) failure to support the existing fixed exchange rate by central banks. B) speculation against the currency by speculators in world exchange markets. C) fundamental disequilibrium in the country's exchange rate. D) all of the above
Why is the fear of expropriation an obstacle to economic growth?
a. Without research and development, no technological advances can be made. b. Large government spending causes negative externalities. c. Powerful special interest groups have too much control. d. No foreign investment comes to the country, because of the lack of guarantees. e. The fear of expropriation causes too many resources to be devoted to military spending which is a highly unproductive sector.
The two main economic criticisms about monopolies are that they are ______.
a. unregulated and illegal b. weak and small c. unfair and inefficient d. violent and aggressive