Which of the following statements is TRUE for society as a whole?
A) Supply of services always reflects all social costs.
B) Demand for services always reflects all social costs.
C) Private costs are not always equal to social costs.
D) Social benefits are always emphasized in advertising.
Answer: C
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Which of the following means that the CPI overstates the actual inflation rate?
A) new goods bias B) quality change bias C) outlet substitution bias D) All of the above cause the CPI to overstate inflation.
Core inflation is measured because the prices of:
A. nondurable goods fluctuate more frequently than the prices of durable goods; therefore, removing them from the basket prevents potential distortion. B. durable goods fluctuate more frequently than the prices of nondurable goods; therefore, removing them from the basket prevents potential distortion. C. food and energy costs fluctuate frequently and can distort actual changes in the cost of living. D. retail consumption items fluctuate frequently and can distort actual changes in the cost of living.