The prices of which of the following goods would be included in the Consumer Price Index?
a. Fighter planes
b. Iron ore
c. Tennis shoes
d. Firefighters' services
e. IBM stock
C
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How do New Keynesians use the existence of long-term nominal contracts to help explain the failure of prices to adjust in the short run?
What will be an ideal response?
Why do externalities arise?
a. The costs of production are not borne by the producer. b. An economic activity imposes a burden on those who are not directly involved in it. c. The consumption of a public good is nonexcludable. d. The government produces goods and services which are consumed by only a particular group of people. e. Goods of mass consumption are not produced as they do not yield profit for the producers.
Suppose you play a round of golf costing $75. The golf takes four hours to play. If you were not playing golf you could be working and earning $40 per hour. The opportunity cost of your golf game is:
a) $75. b) $235. c) $155. d) $160.
A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to
a. an increase in both the inflation rate and the unemployment rate. b. an increase in the inflation rate and a reduction in the unemployment rate. c. no change in either the inflation rate or the unemployment rate. d. an increase in the inflation rate and no change in the unemployment rate.