If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then
A) changes in the CPI are unrelated to the true rate of inflation.
B) changes in the CPI understate the true rate of inflation.
C) changes in the CPI overstate the true rate of inflation.
D) changes in the CPI accurately reflect the true rate of inflation.
C
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Assume the graph shown represents Grace's budget constraint. Which of the following is true?
A. Grace's total utility is constant along her budget constraint.
B. Grace's marginal utility of each good is the same for each combination of goods on her budget line.
C. Grace's total expenditure is constant along her budget constraint.
D. Grace is indifferent between consuming any bundle that lies on the budget constraint.
Chad and Libya are two economies in Africa. Suppose Libya's national income is twice the size of Chad's but Libya's economic growth is only half the growth rate of Chad's. Suppose as well that the MPC in each is 0.75 . You would expect then that the
a. level of investment is higher in Chad than in Libya but the level of saving is higher in Libya than in Chad b. level of investment is lower in Chad than in Libya but the level of saving is lower in Libya than in Chad c. level of investment and of saving is higher in Chad than in Libya d. level of investment and of saving is lower in Chad than in Libya e. consumption is greater than saving in Chad but lower than saving in Libya
The decision rule for constrained optimization is to select the level for each activity at which
A. total benefit per dollar of total cost is equal across all activities. B. marginal benefit equals marginal cost for each activity. C. total benefit equals total cost for each activity. D. marginal benefit per dollar of marginal cost is equal across all activities.
Refer to the above figure. Given the indifference map and budget constraint represented above, the consumer will maximize utility when she consumes at
A. point A. B. point B. C. point C. D. either points A or B.