Which of the following statements regarding the consumer price index and the GDP deflator is correct?
a. The two price measures are always equal.
b. Divergence between the two price measures is the rule, not the exception.
c. Divergence between the two price measures is the exception, not the rule.
d. None of the above is correct.
c
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The marginal propensity to consume is
a. the change in consumption associated with a change in income. b. equal to the marginal propensity to save minus 1. c. equal to 1 minus the marginal tax rate. d. the change in consumption associated with a change in wealth.
The inflation rate
a. explains how prices are reacting to economic policies b. indicates the level of prices charged by all firms in the economy c. measures the annual percent increase in the average level of prices d. measures how fast wages and incomes are rising e. determines the prices that firms will offer to customers