When the Consumer Price Index Rises, the Typical Family

question 76

Multiple Choice

When the consumer price index rises, the typical family

• A) has to spend more dollars to maintain the same standard of living.
• B) can spend fewer dollars to maintain the same standard of living.
• C) finds that its standard of living is not affected.
• D) can offset the effects of rising prices by saving more.

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Definitions:

Classical Notion

An economic theory advocating for free markets, competition, and minimal government intervention in the economy.

Monetary Neutrality

The proposition that changes in the money supply do not affect real variables.

Long-Run Phillips

An economic concept suggesting that there is no long-term trade-off between inflation and unemployment, contrary to the short-run Phillips curve.

Monetary Neutrality

The concept that changes in the money supply only affect nominal variables, like prices, not real variables like output or employment in the long term.