The substitution bias in the consumer price index refers to the idea that consumers ________ the quantity of products they buy in response to price, and the CPI does not reflect this and ________ the cost of the market basket
A) change; overestimates
B) change; underestimates
C) do not change; overestimates
D) do not change; underestimates
Answer: A
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If an economy is stuck in a "bad" equilibrium in the coordination failure model
A) the government should intervene by spending more. B) the government should intervene by spending less. C) the government should promote optimism. D) there is nothing that can be done.
The consumer price index:
a. tracks the value of output over time. b. is not tied to cost-of-living adjustments. c. doubles every five years in the economy. d. is a weighted average of consumer prices. e. is a broader price index measure than the implicit GDP deflator.
In the circular-flow diagram, which of the following items flows from firms to households through the markets for the factors of production?
a. goods and services b. land, labor, and capital c. dollars spent on goods and services d. wages, rent, and profit
Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax
a. also doubles. b. triples. c. quadruples. d. rises by a factor of 8.