If There Is a 5 Percent Increase in the CPI

question 60

Multiple Choice

If there is a 5 percent increase in the CPI, then there will most likely be

• A)a more than 5 percent rise in the cost of living because of the introduction of new goods.
• B)a more than 5 percent rise in the cost of living because consumers substitute away from goods whose relative prices rise towards other goods.
• C)a 5 percent rise in the cost of living.
• D)a less than 5 percent rise in the cost of living because of falling quality of goods over time.
• E)a less than 5 percent rise in the cost of living because consumers substitute away from goods whose relative prices rise towards other goods.

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Definitions:

Industry Structure

The organization or arrangement of the market within an industry, often characterized by the number of firms, product differentiation, and barriers to entry.

Diagram (A)

A graphical representation used to illustrate or clarify information, processes, or systems.

Price

The amount of money expected, required, or given in exchange for something else.

Quantity

The amount or number of a material or immaterial good considered as a unit or in total.