Which of the following is a bias in the CPI?
i. new goods bias
ii. index change bias
iii. commodity substitution bias
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
D
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When the economy suffers a temporary negative supply shock and the monetary policy makers try to stabilize economic activity in the short run, then
A) aggregate demand curve shifts rightward. B) output will be at its potential. C) inflation rate will be higher. D) all of the above. E) both A and B.
Less developed countries are often characterized by imperfect capital markets. Assuming that the LCH applies to these countries and that a large proportion of the population is below fifty the
A) MPC should be relatively high. B) MPC should be relatively low. C) frequency of liquidity constraints is low. D) sensitivity of consumption to loans is low.