The Technique Currently Used to Calculate the CPI Implicitly Assumes

question 5

Multiple Choice

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

• A)relatively more of goods whose relative prices are rising.
• B)goods and services whose quality improves at the rate of growth of real income.
• C)the same relative quantities of goods as in a base year.
• D)relatively less of goods whose relative prices are rising.

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Definitions:

External Cost

Costs incurred by third parties as a result of an economic transaction, which are not reflected in the transaction's market price, often necessitating government intervention.

Social Cost

The total cost to society, including both private costs incurred by individuals and external costs not accounted for by the market.

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period.

Supply Curve

The supply curve is a graphical representation showing the relationship between the price of a good or service and the quantity supplied for a given period, typically upward sloping.