Suppose the Value of the CPI Is 1

question 145

Multiple Choice

Suppose the value of the CPI is 1.100 in year one, 1.160 in year two, and 1.270 in year three. Assume also that the price of computers increases by 3 percent between year one and year two, and by another 3 percent between year two and year three. The price level is increasing, the inflation rate is ________, and the relative price of computers is ________.

• A)increasing; increasing
• B)constant; increasing
• C)constant; decreasing
• D)increasing; decreasing

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Definitions:

Endorsed

Officially approved or recommended; in finance, it refers to signing the back of a negotiable document to make it payable to someone other than the stated payee.

Negotiated

Discussed and agreed upon by parties involved, typically resulting in a formal agreement or contract that accommodates the interests or conditions of those parties.

Instrument

A legal document formalizing an agreement or right, often related to finance or law.

Graduation Gift

An item or sum of money given to someone to celebrate the completion of their graduation.