Which of the following policies might create demand-pull inflation?
A. An increase in interest rates
B. A decrease government spending
C. A cut in taxes
D. All of these policies could create demand-pull inflation
Answer: C
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Suppose higher prices lead consumers to switch from shopping at Abercrombie & Fitch to shopping at Wal-Mart. If the CPI does not reflect this change, it is referred to as
A) a new goods bias. B) a quality change bias. C) an outlet substitution bias. D) a new price bias. E) store bias.
If the Fed decided to reverse its policy actions implemented during the heart of the recession, the Fed would be acting to try to prevent
A) an increase in deflation. B) a decrease in unemployment. C) an increase in inflation. D) an increase in unemployment.
A cartel behaves like
A) a monopolistic competitive firm. B) a perfectly competitive firm. C) a monopolist. D) an oligopolistic firm.
A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because
a. producers are likely to change the number of goods they sell from year to year. b. producers will generally reduce the quality of goods as prices increase over time. c. consumers will tend to substitute away from goods that become more expensive. d. consumers will usually reduce their consumption of goods when they become relatively cheaper.