Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?
What will be an ideal response?
Ques. 2Which of the following is true about the Federal Reserve and its ability to prevent recessions? The Federal Reserve
A) can fine tune the economy and realistically hope to keep the economy from experiencing recessions.
B) cannot realistically fine tune the economy and has little to no effect on the magnitude and length of recessions.
C) does not try to eliminate recessions, but instead focuses on preventing inflation.
D) cannot realistically fine tune the economy, but seeks to keep recessions shorter and milder than they would otherwise be.
Ques. 3Refer to Figure 16-6. With this pricing scheme - a competitive price for the classes and a one-time membership fee - what amount of producer surplus will Sensei earn?
A) the area A + B + C + D + E + F + G + H B) the area E + F.
C) the area H + G + F. D) the area A + B + C + D + E.
Ques. 4Higher interest rates increase both consumption and investment spending.
Indicate whether the statement is true or false
Ques. 5Briefly explain how the miserliness of Ebenezer Scrooge might actually be beneficial for economic growth.
What will be an ideal response?
Ques. 6Refer to Scenario 25-2. As a result of Kristy's deposit, Bank A can make a maximum loan of
A) 2,000. B) 8,000. C) 10,000. D) 50,000.
Ques. 7Refer to Figure 18-6. If area X = 2,060, area Y = 240, and area Z= 2,700, calculate the Gini coefficient for Syldavia.
A) 0.05 B) 0.12 C) 0.46 D) 0.85
Ques. 8Which of the following will increase aggregate expenditure in the United States?
A) an increase in the price level B) an increase in the value of the dollar
C) an increase in interest rates D) an increase in government purchases
Ques. 9The economy suffered a mild recession in 2001. Despite the recession, home sales and durable goods sales remained high. Which of the following is a plausible explanation?
A) The Fed caused a reduction in the federal funds rate to its lowest level in 40 years.
B) Home building and consumer durable purchases are always high during a recession.
C) Rising inflation encouraged many to invest in the real estate market.
D) The Fed's pursuit of contractionary policy stimulated these markets.
Ques. 10Which of the following economists is best known for exploring the application of economic analysis to human resources issues?
A) Edward Lazear B) Alan Krueger
C) Claudia Goldin D) David Hammermesh
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