Assume that the firefighters have gone without a pay increase for 4 years during a tough time in their city's finances. Suppose that things start to look up and the Mayor wants to make up for lost time. If the CPI in 2002 was 125 and 150 in 2006, how much will salaries have to increase to bring the firefighters back up to their real income from 2002?
a. 150.0%
b. 125.0%
c. 20.0%
d. 16.7%
e. 25.0%
C
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In the economic way of thinking, which statement makes the most sense?
A) Costs determine prices. B) Prices determine costs. C) Costs determine demand. D) Demand determines supply.
Speculators who believe the world-wide demand for cocoa products is going to increase enormously next year will cause
A) less cocoa to be consumed next year. B) less cocoa to be consumed this year. C) less cocoa to be produced next year. D) less cocoa to be produced this year. E) none of the above since speculation only affects price.
Which of the following is true of a beneficial supply shock? a. It can lead to a temporary lower price level
b. It can create a recessionary gap. c. It can permanently decrease the economy's price level. d. It can shift the aggregate demand curve rightward. e. It can shift the aggregate demand curve leftward.
Price ceilings are imposed if the government believes
a. the market fails to create an equilibrium price b. the equilibrium price is too low c. an excess supply of the good exists or will result in the near future d. the equilibrium price is too high e. quantity demanded is less than quantity supplied