An increase in money supply causes the real interest rate to ________ and the price level to ________ in general equilibrium.

Computing the CPI is important because ________

A) it is a very accurate and error-free measure of the cost of living B) it helps predict spending patterns for particular goods and services C) government uses it to index entitlements, such as social security benefits, so that beneficiaries do not lose purchasing power in periods of inflation D) all of the above E) none of the above

Your local grocery store reduces transaction costs to the consumer

A) by reducing the consumer's need to travel from food producer to food producer (or manufacturer to manufacturer) to purchase the food staples that the consumer desires. B) by providing a system that directs funds from lenders to borrowers. C) by providing a system of justice to enforce contracts. D) All of the above are correct.