Suppose That a Price Index for a Certain Basket of Goods

question 57

Multiple Choice

Suppose that a price index for a certain basket of goods and services has a value of 150 in 2015 and a value of 156 in 2016.This index suggests that the cost of the market basket of goods and services

• A)was 4% higher in 2016 than in 2015.
• B)was 6% lower in 2016 than in 2015.
• C)was 6% higher in 2016 than in 2015.
• D)was 156% higher in 2016 than in 2015.
• E)was approximately the same in 2016 and 2015.

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Definitions:

Asset Prices

The monetary value assigned to financial and non-financial assets in the marketplace, including stocks, bonds, real estate, and commodities.

Inflation Expectations

The anticipations of consumers and businesses about the rate at which prices for goods and services will rise in the future.

Unemployment

The situation when individuals who are actively seeking work are unable to find employment.

Sacrifice Ratio

The cost of reducing inflation in terms of the amount of output or gross domestic product that is foregone.