Recall That the Laspeyres Price Index (P

question 4

Multiple Choice

Recall that the Laspeyres price index (P.I.) uses the old bundle as weights and the Paasche price index uses the new bundle as weights.If the prices of all goods double and your income triples,

• A)your income increase has exceeded the increase in the Laspeyres P.I.but may not have exceeded the increase in the Paasche P.I.
• B)your income increase has exceeded the increase in the Laspeyres P.I.and has also exceeded the increase in the Paasche P.I.
• C)your income increase has exceeded the increase in the Paasche P.I.but may not have exceeded the increase in the Laspeyres P.I.
• D)you would need to know the old and new consumption bundles to compare your income change with the change in price indexes.
• E)None of the above.

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Definitions:

Cold War

A period of geopolitical tension between the Soviet Union and the United States and their respective allies, lasting from the end of World War II until the dissolution of the Soviet Union in 1991, characterized by threats, propaganda, and other measures short of open warfare.

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The collective institutions and operations aimed at protecting a country from threats and ensuring the safety of its citizens.

World Peace

is the ideal of a future state where countries coexist harmoniously without conflict and all individuals live in freedom and safety.