The Technique Used to Calculate the CPI Implicitly Assumes That

question 70

Multiple Choice

The technique used to calculate the CPI implicitly assumes that consumers buy

• A)relatively more of goods with relative prices that are increasing.
• B)relatively less of goods with relative prices that are decreasing.
• C)the same relative quantities of goods as in a base year.
• D)goods and services whose quality improves at the rate of growth of real GDP.
• E)more computers and CD players and fewer black-and-white TVs.

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Definitions:

Money Supply

The total amount of money available in an economy at a specific time, including cash and bank deposits.

Commodity Money

A form of currency in which the value of the money is derived from the material from which it is made, such as gold or silver coins.

Fiat Money

Currency that a government has declared to be legal tender, despite it not having intrinsic value or being backed by physical reserves such as gold or silver.

T-Account

A graphical representation of a general ledger account that highlights the debit and credit sides.