The market basket approach:
A. gives us a single number to measure how much your total costs for all goods and services change over time.
B. is how economists monitor trends in what people like to buy from year to year.
C. is equivalent to simply averaging the increase in the price of each grocery item.
D. measures changes in the cost of a fixed shopping basket, assuming that typical consumer buys the same items in the same quantities.
Answer: D
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John derives more utility from having $1,000 than from having $100. From this, we can conclude that John
A) is risk averse. B) is risk loving. C) is risk neutral. D) has a positive marginal utility of wealth.
In the classical model, what happens to the level of real GDP if aggregate demand increases?
A) Real GDP increases. B) Real GDP decreases. C) Real GDP would increase at first, then decrease. D) Real GDP would remain the same, at equilibrium.
The saying "the lower the price, the better" may not always be correct for an economy's public interest because
a. people should have to pay for what they want. b. people will overuse something they perceive as being cheaper than the utility they receive for it. c. the government can no longer afford to provide all the goods and services it provides because it is slowly going broke. d. cheaper prices will make people buy less of other things.
If prices rise, then persons living on fixed incomes will
a. see their real incomes falling. b. see the purchasing power of their savings fall. c. need to spend more to maintain their standard of living. d. All of the above are true.