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Author Question: As inflation drives up prices, people attempt to find substitutes and adjust what they buy. The ... (Read 160 times)

deesands

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  • Posts: 514
on: Jun 30, 2018
As inflation drives up prices, people attempt to find substitutes and adjust what they buy. The resulting substitution bias problem causes the CPI to:
 a. overstate the impact of higher prices on consumers.
  b. consistently underestimate the true inflation rate.
  c. omit the benefits of product quality improvements.
  d. have larger fluctuations than other price indexes.

Question 2

If the marginal propensity to consume (MPC) is 0.90, the value of the spending multiplier is 90.
 a. True
  b. False
  Indicate whether the statement is true or false


trampas

  • Sr. Member
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  • Posts: 320
Reply #1 on: Jun 30, 2018
Answer to Question 1

a

Answer to Question 2

False


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