List the four sources of bias in the CPI and briefly explain them
What will be an ideal response?
There are four potential biases. First is the new goods bias, which occurs when new, higher priced goods replace older goods. Second is the quality change bias, which occurs when the CPI fails to take account of quality improvements that raise prices. Third is the commodity substitution bias, which occurs when consumers shift their purchases away from goods whose relative prices rise toward lower priced goods. Last is the outlet substitution bias, which because with higher prices, people switch to low-cost discount stores.
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The balanced-budget multiplier is equal to
A) 1. B) the reciprocal of the increase in government expenditures. C) the percentage increase in taxes. D) the percentage increase in government expenditures.
A firm's total product curve shows that at first it has
A) economies of scale and then diseconomies of scale. B) diseconomies of scale and then economies of scale. C) increasing marginal returns and then diminishing marginal returns. D) diminishing marginal returns and then increasing marginal returns.
Which of the following is an accurate statement about interest rates?
a. Increases and decreases in money supply have the largest effect on gross interest rates. b. Increases and decreases in money supply have the largest effect on real interest rates. c. When the short-term nominal interest rate changes, the long-term real interest rate often changes in the opposite way. d. When the short-term nominal interest rate changes, the long-term real interest rate often changes in the same way.
Which of the following supermarket strategies to increase sales would be most consistent with a neoclassical economics (versus behavioral economics) approach?
A. Holding posted prices constant but reducing package sizes. B. Providing discounts for buying in bulk. C. Placing the most frequently purchased items at the back of the store. D. Positioning high-profit kids cereals on the lower shelves of the cereal aisle.