Assume That Between 2017 and 2018, the CPI of a Country

question 69

Multiple Choice

Assume that between 2017 and 2018, the CPI of a country rose from 182 to 185. If household incomes rose by 3% during that period of time, then which of the following is true?

• A)The purchasing power of household income fell between 2017 and 2018.
• B)The purchasing power of household income rose between 2017 and 2018.
• C)The purchasing power of household income remained constant between 2017 and 2018.
• D)The CPI cannot be used to determine how the purchasing power of household income changes over time.

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Definitions:

Ordinary Goods

Products or services whose demand increases when consumer income rises, and falls when consumer income decreases.

Coffee

A brewed drink prepared from roasted coffee beans, which are the seeds of berries from the Coffea plant, and a significant commodity in global trade.

Cream

The top layer of milk that is richer in fat and can be skimmed off, used metaphorically to refer to the best or choicest part of something.

Marginal Utilities

Additional satisfaction derived from consuming an extra unit of a product, emphasizing the declining utility with increased consumption.