Why should the CPI base year be changed periodically?
What will be an ideal response?
The base period should be changed because spending habits change over the years, new products enter the market, and the comparison of current prices with prices from a much earlier period may become meaningless. Having a later base year makes the CPI more relevant.
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Refer to Figure 27-1. Suppose the economy is in short-run equilibrium below potential GDP and no fiscal or monetary policy is pursued. Using the static AD-AS model in the figure above, this would be depicted as a movement from
A) A to E. B) C to B. C) B to C. D) B to A. E) A to B.
If the Federal Reserve wished to decrease interest rates using open market operations, it would
A. buy gold. B. buy U.S. government securities. C. buy corporate stocks. D. sell U.S. government securities.
Suppose that a perfect-maximizing monopolist operates with a horizontal marginal cost curve and no fixed costs. Which of the following would NOT be represented as part of the area between its demand curve and marginal cost curve?
A. economic profits B. total costs C. deadweight loss D. consumer surplus
To alleviate the commons problem, the government can
A) apply a tax. B) set a quota. C) assign property rights. D) All of the above.