Vocab Check 2.4, 2.5

A continuous increase in the consumer price index (CPI) is

• deflation

• stagflation

• inflation

• recession

• disinflation

The consumer price index measures which of the following?

• The change over time of the weighted prices of a particular group of goods and services

• The change over time of the weighted wholesale price index

• The change over time of the difference between the gross domestic product deflator and the wholesale price index

• Inflation corrected for changes in the real gross domestic product

• Inflation corrected for changes in the wholesale price index

Inflation occurs when there is a sustained increase in which of the following?

• Real gross domestic product

• The average price level

• The price of any commodity

• Labor productivity

• The unemployment rate

Deflation is...

• Sudden and quick reduction of prices

• An overall maintainence of prices

• Marginal reduction in the inflation rate over a short period of time

• An overall drop in prices

Comparative advantage implies that

• no country should specialize completely in the production of any one good

• every country should try to export more than it imports

• developing countries should import raw materials and export manufactured goods

• two countries should benefit from trade unless both have equal opportunity costs in every good

• countries should impose tariffs to protect their domestic industries

Assume that an economy produces just two goods, X and Y, as shown in the table above. If year 1 is the base year, the consumer price index for year 2 in this economy is

• 57.1

• 66.7

• 100

• 175

• 250