In the rational expectations theory, a temporary change in real output could result from:

Suppose the observed annual quantity of steel exchanged in the European market is 30 million metric tons, and the observed market price is 90 euros per ton. If the price elasticity of demand for steel is -0.3 in Europe, what is an appropriate value for the price coefficient (b) in a linear demand function ?

A. b = -0.9 B. b = 0.9 C.b = 0.1 D. b = -0.1

In 1995, the Boskin commission identified which of the following problems with the computation of the CPI?

A) it does not account for the fact that consumers can substitute away from products as they get more expensive B) an increase in price could be the result of quality improvements rather than an increase in the cost of living C) it often does not reflect decreases in the cost of living that occur when new goods are introduced D) all of the above E) none of the above