An increase in the Consumer Price Index indicates that
a. the real income of households is increasing.
b. the purchasing power of the dollar is increasing.
c. the cost of buying the typical bundle of goods consumed by households is increasing.
d. the real net worth of consumers is increasing.
C
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Marylou, whose utility of wealth curve is shown in the figure above, faces two options. Option A yields $200 for sure. Option B has a 0.3 probability of yielding $100, and a 0.7 probability of yielding $300. Marylou, who is
A) picks option A. B) picks option B. C) is indifferent between option A and option B. D) needs more information to make a choice.
Refer to Figure 9.1. Assume the economy is initially at point A
Following the initial change in short-run equilibrium resulting from a recession caused by an increase in oil prices, the end of the recession is best represented by which long-run equilibrium combination of price level and real GDP? A) P1; Y1 B) P3; Y3 C) P1; Y3 D) P3; Y1