Which one of the following is TRUE?
A. The consumer price index measures changes in the average income of consumers.
B. Inflation increases the real value of money.
C. In the base year, the value of a price index is 100.
D. The market basket defined for the consumer price index contains more items than does the market basket defined for the GDP deflator.
Answer: C
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When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
Refer to Figure 16-8. In the graph above, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could Congress and the president use to move the economy to point C?
A) decrease government purchases B) increase income taxes C) sell Treasury bills D) increase government purchases
Which of the following is an accurate statement about economics?
a. It helps us understand the consequences of our choices. b. It tells us when to choose. c. It tells us how to choose. d. It is an objective guide of what to choose.
The World Bank makes loans primarily to
A. developing nations. B. nations without national debt. C. nations without free markets, such as North Korea. D. highly developed nations.