In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by
a. surveying consumers.
b. surveying sellers of the goods and services.
c. working backward from the rate of inflation to arrive at imputed values for those quantities.
d. arbitrary choices made by federal government employees.
a
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
Few firms in the United States are monopolies because
A) when a firm earns profits, other firms will enter its market. B) most products that firms produce have substitutes. C) few firms experience economies of scale. D) of antitrust laws.
Bank C receives a deposit of $40,000 . If the required reserve ratio in the economy is equal to 25 percent, the final change in demand deposits of Bank C will be equal to:
a. $160,000. b. $200,000. c. $100,000. d. $150,000.
The price of gold is $300 per ounce in New York and 435 Canadian dollars per ounce in Toronto, Canada. If the law of one price holds for gold, the nominal exchange rate is ________ Canadian dollars per U.S. dollar.
A. 1 B. 1.45 C. 0.690 D. 0.333