Which of the following is a reason why the Consumer Price Index (CPI) is not calculated as a simple average of all prices?
a. Some goods experience large price changes and the CPI would be too variable if computed by a simple average.
b. Goods differ in their importance in the average consumer's budget.
c. Some goods never experience price changes and the CPI would not be variable enough if computed as a simple average.
d. It would be difficult to compute a price index using a simple average of all prices.
e. Actually, the CPI is a simple average of all prices.
B
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A supply curve slopes upward because quantity supplied is higher when price is higher.
Answer the following statement true (T) or false (F)
Choosing optimal user fees for government produced services is similar to choosing optimal taxes.
A. True B. False C. Uncertain
Assume the federal government collects $20 billion in taxes and spends them on the public. If the money multiplier is 2.5, bank reserves
A) and the money supply still increase by only $20 billion. B) increase by $20 billion and the money supply increase by $50 billion. C) and the money supply both increase by $50 billion. D) and the money supply are unaffected.
The compensation savers receive for waiting on their consumption is the
A. expected rate of inflation. B. nominal interest rate minus the real interest rate. C. nominal interest rate. D. real interest rate.