When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the:
A. consumer equilibrium effect.
B. price effect.
C. income effect.
D. substitution effect.
Answer: D
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All the following would be a possible loan that the International Monetary Fund might make EXCEPT
A) long-term loans to a nation's government which support growth promoting projects. B) short-term loans to a nation's government. C) long-term loans to countries which are having problems in repaying existing debts. D) a loan to a private firm.
Which one of the following statements is TRUE of the Consumer Price Index?
A) It does not take account of the price of imported goods and services. B) It does not take into account the price of used goods. C) It understates the true rate of inflation. D) It measures changes in prices of a fixed basket of goods.