The consumer price index (CPI) overstates the true inflation rate because it ignores changes in consumers' purchasing patterns as relative prices change
a. True
b. False
Indicate whether the statement is true or false
True
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Refer to the accompanying figure. Suppose the solid line represents the current supply of Star Wars action figures. If the price of the plastic used to make action figures rises, current supply will:
A. shift to S(A). B. not change because a change in the price of plastic will not affect the demand for action figures. C. shift to S(B). D. not change; only the quantity supplied will change.
Who benefits primarily from rent? controls?
A) construction workers
B) poor people looking for low-income housing
C) all who want to rent
D) only renters who are able to get units at below-market rates
In the above figure, market equilibrium at point E yields the quantity X. The quantity X* is socially optimal amount. The government can achieve the optimal outcome by
A. establishing a tax of P3 - P1 per unit of the good sold. B. setting the price at P4. C. establishing a tax of P3 - P2 per unit of the good sold. D. setting the price at P1.
According to the life-cycle theory of consumption, people tend to ________ during their main working years.
A. consume more than they earn B. save C. accumulate negative wealth D. dissave