The Commodity Substitution Bias Is That

question 85

Multiple Choice

The commodity substitution bias is that

• A) national saving and foreign borrowing are interchangeable.
• B) government spending is a good substitute for investment expenditures.
• C) consumers decrease the quantity they buy of goods whose relative prices rise and increase the quantity of goods whose relative price falls.
• D) consumers substitute high- quality goods for low- quality goods.

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Definitions:

Natural Rate

Often refers to the natural rate of unemployment, which is the level of unemployment consistent with a stable rate of inflation, or the equilibrium rate unaffected by short-term fluctuations.

Fully Employed

Refers to a situation where all available labor resources are being used in the most economically efficient way.

GDP

Gross Domestic Product, the total market value of all final goods and services produced within a country in a specific time period.

Natural Rate

The natural rate typically signifies the unemployment rate that maintains a steady inflation rate over time, also known as the natural rate of unemployment.