When the CPI increases from one year to the next:
A. the cost of living has decreased.
B. deflation has occurred.
C. people need to spend more money to buy the same amount of goods as the previous year.
D. All of these statements are true.
C. people need to spend more money to buy the same amount of goods as the previous year.
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Large current account deficits imply large financial account surpluses
Indicate whether the statement is true or false
Assume that an increase in Costa Rica's government budget deficit reduced desired national saving by 10 million colon. Assuming Costa Rica is a small open economy, you would expect the government's action to
A) increase the current account balance by exactly 10 million colon. B) increase the current account balance by less than 10 million colon. C) reduce the current account balance by exactly 10 million colon. D) reduce the current account balance by more than 10 million colon.
Which of the following examples shows the problem caused by the Fed’s lack of control over certain financial entities?
a. The Fed’s expansionary policy backfires because the government raises taxes. b. The Fed’s contractionary policy backfires because the estimated MPC is inaccurate. c. The Fed’s expansionary policy is neutralized by decreased consumer confidence. d. The Fed’s contractionary policy is counteracted by the policies of Chinese banks.
In a floating exchange market, the exchange rate for pesos and yen will not change when
A. the yen trades at a rate below the equilibrium level. B. the peso trades at a rate above the equilibrium level. C. the currencies trade at the equilibrium exchange rate. D. it will change in all of these situations.