If Cheeseburgers Become More Expensive and Consumers Switch Their Purchases

question 105

Multiple Choice

If cheeseburgers become more expensive and consumers switch their purchases away from cheeseburgers but the consumer price index (CPI) still assumes they buy the same amount,then

• A) the CPI will reflect upward bias.
• B) the CPI will reflect downward bias.
• C) consumers will experience money illusion.
• D) consumers will experience a price confusion problem.
• E) deflation will occur because consumers no longer buy cheeseburgers.

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Definitions:

Asset Account

An account that shows the value of the assets a company controls, which can include cash, equipment, and real estate.

Accrued Interest

Interest that has been incurred but not yet paid, often related to bonds or loans.

Note Receivable

A written promise that a certain amount of money will be paid at a future date, representing an asset for the holder.

Interest Revenue

Income earned by an entity from lending money or through investments in interest-bearing assets.