Suppose the price of banana rises over time and consumers respond by buying fewer bananas. This situation contributes to which bias in the consumer price index?
a. Substitution bias.
b. Transportation bias.
c. Quality bias.
d. Indexing bias.
a
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The production possibilities frontier has a tendency to bow outward from the origin.
Answer the following statement true (T) or false (F)
Figure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. For an output level greater than Q = 100, the average total cost curve is upward-sloping because:
A. decreasing average fixed cost outweighs increasing average variable cost. B. diminishing returns are not severe enough to outweigh decreasing average fixed cost. C. increasing average variable cost outweighs decreasing average fixed cost. D. marginal cost is increasing.
An open economy produces most of the goods and services that it needs, with few imports and exports.
Answer the following statement true (T) or false (F)
If the marginal propensity to consume is very close to zero, then the multiplier
A) cannot be calculated. B) is very close to one. C) is very large. D) is very close to zero. E) might be negative if the marginal tax rate is large enough.