Economics MCQ - Economics Section 2
Stagflation is an economic state resulting from a combination of a high
inflation rate and a high level of unemployment.
In a Laspeyres index upward biases such as substitution bias and quality
bias tend to overstate the actual cost of living.
Using a fixed basket of goods and services to measure price indices
results in three biases: substitution bias, quality (not quantity) bias, and
new product bias.
- A The Fisher index is an arithmetic mean of the Laspeyres index and the Paasche index.
- B The Laspeyres index is a price index created by using a fixed basket of goods and services.
- C An upward bias in the inflation rate is created when new products are not included in the fixed basket of goods and services.
The Fisher index is a geometric mean of the Laspeyres index and the
Paasche index.
