The problems with using the consumer price index as a measure of the cost of living are important because
a. even the appearance of high rates of inflation cause voters to become disenchanted.
b. politicians have manipulated the measurement problems to their advantage.
c. many government programs use the CPI to adjust for changes in the overall level of prices.
d. if the price level is overstated, consumers will be taken advantage of by sellers of consumer goods.
c
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Refer to the graph above for a private closed economy. At the $150-billion level of GDP:
A. Aggregate expenditures are less than real GDP, so GDP will rise
B. Aggregate expenditures are more than real GDP, so GDP will fall
C. Aggregate expenditures are more than real GDP, so GDP will rise
D. Aggregate expenditures will be equal to GDP, so there will be no change in GDP
The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.