Keynes believed the economy was:
A. always moving toward potential income.
B. always moving away from potential income.
C. always at potential income.
D. fluctuating around potential income.
Answer: D
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Explain the two basic mechanisms that increase GDP per capita over the long term
What will be an ideal response?
Real GDP is $9 trillion in the current year and $8.6 trillion in the previous year. The economic growth rate between these years has been
A) 5.67 percent. B) 4.65 percent. C) 10.31 percent. D) 7.67 percent. E) $0.4 trillion.
As inflation drives up prices, people attempt to find substitutes and adjust what they buy. The resulting substitution bias problem causes the CPI to:
a. overstate the impact of higher prices on consumers. b. consistently underestimate the true inflation rate. c. omit the benefits of product quality improvements. d. have larger fluctuations than other price indexes.
According to the search model developed by Stigler, when there are search costs, sellers know that consumers are becoming acquainted with product quality, and consequently all sellers set the same quality. In contrast if there are no search costs, product quality differences can persist over time, even for identically priced products
Indicate whether the statement is true or false