In Bovania,milk Constitutes 56% of the Typical Basket of Goods

question 104

Multiple Choice

In Bovania,milk constitutes 56% of the typical basket of goods for a typical consumer.Let's say the price of milk rises by 7% and the prices of all other goods fall by 4%.Based on the information given,we can definitely say:

• A) the consumer price index (CPI) in Bovania is greater than in the previous year.
• B) the CPI in Bovania is less than in the previous year.
• C) if consumers get a 4% pay raise, they are worse off in terms of their real income compared to inflation as measured by the Bovanian CPI.
• D) the gross domestic product (GDP) deflator must be higher than the CPI.
• E) the GDP deflator must be less than the CPI.

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Definitions:

Collateral

refers to assets that are pledged as security for the repayment of a loan, ensuring the lender can seize the assets if the loan is not repaid.

Reimbursement

The process of compensating someone for an expense they have incurred.

Surety

A person or entity that takes responsibility for another's performance of an undertaking, such as fulfilling the terms of a contract.

Outlays

Expenditures or the amount of money expended in the course of conducting business or executing a project.