Answer the following statements true (T) or false (F)
1. The current base year for the CPI is 1985.
2. If a worker’s money wage increases at a faster pace than the CPI, his or her real wage will rise.
3. As income or spending patterns change substantially, it is wise to change the base year of the CPI.
4. The CPI does not necessarily make adjustments for improvement in the quality of goods and services in the market basket.
5. Real wages are determined by multiplying money wages by the CPI.
1. FALSE
2. TRUE
3. TRUE
4. TRUE
5. FALSE
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Assume that the M1 multiplier is 3 and the Federal Reserve sells $100 million worth of government securities. Bank reserves will
A) rise by $100 million. B) fall by $100 million. C) fall by $300 million. D) fall by $33.33 million.
Suppose there was an unexpected increase in aggregate demand. We would expect to observe
A) frictional unemployment to increase. B) the duration of unemployment and the amount of unemployment to decrease. C) higher wages, with the duration of unemployment and the amount of unemployment unchanged. D) a decrease in aggregate demand.
A tariff is better than a quota because
A. it does not distort trade as much. B. quotas are inflexible. C. tariffs produce tax revenue. D. quotas hurt domestic producers; tariffs hurt foreign producers.
Figure 8-2
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In Figure 8-2, which of the following moves can be explained by a decrease in the prices of stock on the NASDAQ?
A. A to B B. A to C C. A to D D. A to E