Suppose the Value of the Consumer Price Index (CPI)is 110

question 189

Multiple Choice

Suppose the value of the consumer price index (CPI) is 110 in year 1,116 in year 2,and 118 in year 3.Assume also that the price of computers increases by 10% between year 1 and year 2,and by another 10% between year 2 and year 3.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) decreasing;increasing
• E) decreasing;decreasing

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Definitions:

White-collar Employment

Jobs that typically involve professional, managerial, or administrative work, often in an office setting, as opposed to blue-collar jobs that involve manual labor.

Substitution Effect

The change in demand for a good due to a change in its price, leading consumers to substitute it with another product.

Output Effect

When the price of any resource rises, the cost of production rises, which, in turn, lowers the supply of the final product. When supply falls, price rises, consequently reducing output.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a factor of production, holding all other factors constant.