The consumer price index is subject to substitution bias because
a. some pairs of goods are complements rather than substitutes.
b. some goods are inferior rather than normal.
c. the law of demand applies to most, if not all, goods.
d. the index does not take into account the likelihood that consumers substitute newly-introduced goods for more-established goods.
c
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Policy directives used by the Fed to moderate swings in the business cycle are considered
a. moderating fiscal policy b. countercyclical monetary policy c. accelerating monetary policy d. reserve requirement rates e. federal funds policy
If the price of a car in the United States is $22,000, and the exchange rate between the dollar and the Japanese yen falls from 125 yen to 105 yen per dollar, then the price of the American car in Japan will
A. rise. B. fall. C. remain the same. D. be irrelevant, because the Japanese government will impose restrictions on imports from the United States.