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The Consumer Price Index for Macroland Consists of Only Two

question 89

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The consumer price index for Macroland consists of only two items: pizzas and soft drinks.In 2011,the base year,the typical consumer purchased 10 pizzas for $5 each and 25 soft drinks for $2 each.In 2012,the typical consumer purchased 15 pizzas for $8 each and 30 soft drinks for $3 each.The consumer price index for 2012 on Macroland equals


Definitions:

Monetary Rule

The money supply may grow at a specified annual percentage rate, generally about 3–4 percent.

Money Supply

The total quantity of money available in the economy at a specific time, including cash, coins, and balances held in checking and savings accounts.

Recessionary Gap

This occurs when equilibrium GDP is less than full-employment GDP.

Aggregate Demand

The total demand for all goods and services within an economy at a given overall price level and in a given time period.

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