What are the alternative measures of the price level and how do they address the problem of bias in the CPI?
What will be an ideal response?
The first of three alternative price level is the chained CPI. The chained CPI is calculated in a similar manner as chained-dollar real GDP. The chained CPI overcomes the commodity substitution and new goods bias because it uses current as well as previous period quantities. The second alternative price level is the personal consumption expenditure deflator or PCE deflator. The PCE deflator is calculated from real and nominal consumption expenditure. The PCE deflator uses a broader basket of goods and services than the CPI and, similar to the chained CPI, is also calculated using a chained method. The third alternative is the GDP deflator. The GDP deflator is similar to the PCE deflator except the GDP deflator uses the prices from all the goods and services included in GDP.
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Define and give an example of how a spell of structural unemployment can begin
What will be an ideal response?
A principle difference between the original Keynesian model and the new Keynesian model is that in the new version
A) the traditional assumptions of profit maximization is no longer included. B) monetary policy is impotent. C) wages and prices adjust slowly to market conditions. D) All of the above are correct.
If the quantities of labor and capital in an economy each increase by the same x percent, which of the following will increase by x percent?
A) marginal product of capital B) economic profits C) share of capital income in national income D) rental price of capital E) none of the above
The residual demand curve is
A) the market demand minus the supply of other firms. B) the remaining demand after the market clears. C) the market demand minus the supply of one firm. D) the long-run demand for a market.