The Consumer Price Index is:
A. A measure of changes in the relative prices of significant consumer goods.
B. A measure of changes in the price of all goods and services.
C. A measure of changes in the average price of consumer goods and services.
D. Used to determine if the economy is functioning at full employment.
C. A measure of changes in the average price of consumer goods and services.
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When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
The marginal propensity to consume (MPC)
A) shows the percentage of real disposable income consumed at each level of income. B) shows how much of an extra dollar of real disposable income is spent. C) shows how much real disposable income changes when consumption falls. D) is greater than 1 only if the marginal propensity to save is greater than 1.
What factor would not help resolve the Bertrand paradox (that a perfectly competitive outcome can emerge with as few as two firms in the market) if the basic Bertrand model were extended to include it?
a. Repeated interaction b. Search costs c. Sequential moves d. Product differentiation
Which of the following is true of the Golden Age of fiscal policy of the 1960s? a. Fiscal policy was used to prevent output from expanding in 1964
b. Lyndon B. Johnson cut income tax rates to reduce inflationary pressures in the economy c. A tax cut was introduced to increase savings and unemployment. d. A tax cut increased disposable income and consumption. e. The unemployment rate rose by 5 percent for the first time in seven years