Between 2017 and 2018, the CPI of a small nation rose from 182 to 185. If household incomes rose by 3% during that period of time, which of the following is true?
A) The purchasing power of household income rose between 2017 and 2018.
B) The purchasing power of household income fell between 2017 and 2018.
C) The purchasing power of household income remained constant between 2017 and 2018.
D) The CPI cannot be used to determine how the purchasing power of household income changes over time.
Answer: A
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Refer to Scenario 16.3. What is Sally's marginal rate of substitution of tee shirts for candy at the current distribution?
A) 9/4. B) 2 C) 4/9. D) It is impossible to determine without the prices of each commodity.
Which of the following is likely to be an effect of inflation?
a. An increase in the willingness of lenders to lend money for longer periods b. A decrease in the willingness of borrowers to borrow money for longer periods c. A decrease in the purchasing power of lenders in the economy d. An increase in the willingness of people to buy bonds as a hedge against rising prices e. An increase in the willingness of people to buy physical assets as a hedge against rising prices