Suppose we shopped for a basket of goods in Year 1 and it cost 350 . Suppose the same basket of goods adds up to 385 in Year 2 . If we use Year 1 as a base year, what would be the Year 2 CPI?
a. 35.
b. 90.
c. 100.
d. 110.
e. 135.
QUESTION 2According to Keynesian economics, fiscal policy should be coordinated to create a surplus during economic expansions.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3The view that decision-maker expectations are based on actual outcomes observed during the recent past is called the:
a. rational expectations hypothesis.
b. adaptive expectations hypothesis.
c. permanent income theory.
d. recognition lag.
QUESTION 4A measure comparing the prices of consumer goods and services that a household typically purchases to the prices of those goods and services purchased in a base year is:
a. the GDP deflator.
b. the consumer price index.
c. the price level.
d. inflation.
e. the base measure.
QUESTION 5Fiscal policy is the management of aggregate demand through changes in taxes and government spending.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6The adaptive expectations hypothesis implies that people:
a. adjust their expectations quickly to policy changes.
b. expect the next period to be pretty much like the recent past.
c. will always be correct in their forecast for the next period.
d. change their expectations about the future if policy changes.
QUESTION 7Suppose a market basket of goods and services costs 1,000 in the base year and the consumer price index (CPI) is currently 110 . This indicates the price of the market basket of goods and services is now:
a. 110.
b. 1,000.
c. 1,100.
d. 1,225.
QUESTION 8According to Keynesian economics, fiscal policy should create a deficit during economic contractions.
a. True
b. False
Indicate whether the statement is true or false
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