Why does core inflation not include energy or food prices?
What will be an ideal response?
Calculations for core inflation do not include energy and food prices because they are volatile and could spike and then drop, masking the real pace of inflation. A recent example is the dramatic rise of gasoline prices in the first half of 2008, which resulted in increases in food prices. Although both represent price increases without a corresponding increase in value, core inflation is often unaffected by these large price changes. Counting those increases as inflation would have made it harder to understand what was really happening to consumer prices.
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The demand for Mexican tomatoes by an American food grocery chain creates a
A) demand for the U.S. dollar. B) demand for an interest rate differential. C) supply of Mexican pesos. D) supply of U.S. dollars.
All points above the budget line are
A) inferior to every point on the budget line. B) preferred to every point on the budget line. C) unaffordable. D) Both answers B and C are correct.
When an aggregate demand shock hits the economy ________
A) there is no conflict for the central bank between pursuing price or output stability because of the divine coincidence B) the same long-run equilibrium real interest rate is reached whether the central bank intervenes or not C) the long-run level of output is unaffected D) all of the above E) none of the above
Solutions to structural stagnation require difficult supply-side structural changes to accompany any demand-side stimulus if they are to be successful in reducing unemployment significantly.
Answer the following statement true (T) or false (F)