Suppose the Price of Banana Rises Over Time and Consumers

question 25

Multiple Choice

Suppose the price of banana rises over time and consumers respond by buying fewer bananas. This situation contributes to which bias in the consumer price index?

• A) substitution bias
• B) transportation bias
• C) quality bias
• D) indexing bias

Explain the relationship between aggregate supply and aggregate demand in determining equilibrium GDP.

Describe the three ranges of the aggregate supply curve and their economic implications.

Compare and contrast Keynesian and Classical theories of employment.

Explain the wealth effect and its impact on the economy.

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Definitions:

Mesophyll

The inner tissue of a leaf, containing many chloroplasts where photosynthesis occurs.

Photosynthesis

The process by which green plants and some other organisms use sunlight to synthesize foods from carbon dioxide and water, generating oxygen as a byproduct.

Carbon Dioxide

This gas, which has no color and no smell, is generated when carbon and organic substances burn and through the act of respiration. It is a natural component of the air and is utilized by plants for photosynthesis.

Sugar

A sweet-flavored substance derived from various plants, primarily sugar cane and sugar beet, consisting chiefly of sucrose, and used as a sweetener in food and drink.