"The market basket used to calculate the CPI is revised monthly to more accurately depict consumers' choices. The price data for the CPI are collected every month." Are the previous sentences true or false?
What will be an ideal response?
The first sentence is false and the second is true. The point of the CPI is to determine how the prices of a fixed basket of goods and services change over time, so the CPI basket is revised only infrequently. However, the prices for the goods and services in the basket are collected monthly so that the CPI can be computed monthly.
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Which of the following correctly explain Ricardian equivalence?
a. Government spending that is financed by borrowing has a smaller effect on the economy than government spending financed by raising taxes. b. Consumers do not base current spending on future expected tax liabilities. c. Government borrowing can function like increased current taxes, reducing current household and business expenditures. d. The government should balance its budget by equating revenue and expenditure in every fiscal year. e. Government spending does not crowd out private investment.
A bank failure occurs when a bank
a. cannot call in its loans b. spends all of its reserves c. is unable to meet its depositors' requests to withdraw funds d. cannot make any more loans e. makes bad loans
A fixed exchange rate system encourages speculators to attack weaker currencies
a. True b. False Indicate whether the statement is true or false
Related to the Economics in Practice on page 26: Which one of the following occurs when an individual enters the paid work force?
A. The opportunity cost of time for housework decreases, because as more people enter the work force, businesses have greater incentives to develop innovations that make housework more efficient. B. The opportunity cost of time for housework increases, because time spent on housework could be spent on money-earning activities. C. The opportunity cost of time for housework increases, because money earned at a job can allow individuals to pay someone to do household chores that the individuals used to do themselves. D. The opportunity cost of time for housework decreases, because increased earning power makes individuals less likely to do their own housework.