The new product bias in the consumer price index refers to the idea that
A) consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers.
B) consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers.
C) new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.
D) consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers.
Question 2
Goodyear benefitted when the Federal Reserve slashed the federal funds rate to near-zero levels in 2008. Lower interest rates increased demand for its tires, which would allow Goodyear to ________ employment and ________ prices.
A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase
Question 3
According to the short-run Phillips curve, the unemployment rate and the inflation rate are
A) negatively related. B) unrelated.
C) positively related. D) unaffected by monetary policy.
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