A Consumer Price Index Adjustment Overcompensates for Inflation Because It

question 88

Multiple Choice

A Consumer Price Index adjustment overcompensates for inflation because it ignores

• A)the income effect when relative prices change.
• B)the substitution effect when relative prices change.
• C)that some goods are inferior.
• D)that the substitution effect may offset the income effect.

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Definitions:

Motivation

All the processes that initiate, direct, and sustain behavior.

Primary Drives

Basic, innate urges such as hunger, thirst, and the drive for sex, which are essential for survival.

Drive-Reduction Principle

A theory suggesting that psychological needs create an aroused state that drives an individual to engage in behaviors to reduce that tension or fulfill the need.

Motivation

The driving force behind actions, fueled by the desire to achieve a goal or satisfy a need.