The budget line shift from ab to cd in the above figure is consistent with:
A) decreases in the prices of both M and N .
B) an increase in the price of M and a decrease in the price of N .
C) a decrease in money income.
D) an increase in money income.
Answer: B) an increase in the price of M and a decrease in the price of N .
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If protective import-restricting tariff are imposed by a country, in the majority of cases that nation's consumers end up
A) paying a lower price and consuming more of the good than they otherwise would. B) paying a lower price and consuming less of the good than they otherwise would. C) paying a higher price and consuming less of the good than they otherwise would. D) paying a higher price and consuming more of the good than they otherwise would.
To the extent that the CPI does not accurately measure the true price level,
a. the BLS will change the underlying market basket of goods b. it is useless c. it exaggerates the true cost of living d. it results in underindexation of social security payments e. it underestimates the true cost of living