The Commodity Substitution Bias Is That

question 105

Multiple Choice

The commodity substitution bias is that

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

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Definitions:

Monthly Compounding

The process where interest on an investment or loan is calculated and added to the principal sum every month.

Payments

Money transferred from one party to another in exchange for goods, services, or to fulfill a contractual obligation.

Account

A record or statement of financial expenditure and receipts relating to a specific period or purpose.

Effective Rate

The actual interest rate an investor receives or pays after the effects of compounding interest and all charges are considered.