Question 1

The consumer price index was 200 in 2006 and 210 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

Accepted Answer

A)   1.5 percent
B)   1.75 percent
C)   11.25 percent
D)   11.5 percentE) All of the above
F) B) and C)

Question 2

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Accepted Answer

A) True 
 B)False

Question 3

Table 11-5
The table below pertains to Napandsnack,an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.
 
-Refer to Table 11-5.If the base year is 2010,then the economy's inflation rate in 2010 was

Accepted Answer

A)   10.5 percent.
B)   15.0 percent.
C)   20.0 percent.
D)   25.00 percent.E) A) and C)
F) C) and D)

Question 4

A decrease in the price of domestically produced nuclear reactors will be reflected in

Accepted Answer

A)   both the GDP deflator and the consumer price index.
B)   neither the GDP deflator nor the consumer price index.
C)   the GDP deflator but not in the consumer price index.
D)   the consumer price index but not in the GDP deflator.E) A) and B)
F) B) and D)

Question 5

Jay and Joyce meet George,the banker,to work out the details of a mortgage.They all expect that inflation will be 2 percent over the term of the loan,and they agree on a nominal interest rate of 6 percent.As it turns out,the inflation rate is 5 percent over the term of the loan.
a.
What was the expected real interest rate?
b.
What was the actual real interest rate?
c.
Who benefited and who lost because of the unexpected inflation?

Accepted Answer

a.
The expected real interest rate was 4...

Question 6

List the three major problems in using the CPI as a measure of the cost of living.

Accepted Answer

(1)Substitution bias.The CPI ignores the...

Question 7

In general,if a consumer good is produced domestically and consumed domestically,an increase in its price will have which of the following effects?

Accepted Answer

A)   The consumer price index will increase relatively more than will the GDP deflator.
B)   The consumer price index and the GDP deflator will increase by the same amount.
C)   The consumer price index will increase relatively less than will the GDP deflator.
D)   One cannot generalize about the increase in the consumer price index relative to the increase in the GDP deflator.E) A) and C)
F) All of the above

Question 8

Suppose the price index was 105 in 2007,115.5 in 2008,and the inflation rate was lower between 2008 and 2009 than it was between 2007 and 2008.This means that

Accepted Answer

A)   the price index in 2009 was lower than 115.5.
B)   the price index in 2009 was lower than 126.
C)   the price index in 2009 was lower than 127.05.
D)   the inflation rate between 2008 and 2009 was lower than 1.1 percent.E) All of the above
F) C) and D)

Question 9

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent,then the real interest rate is

Accepted Answer

A)   -5 percent.
B)   1.67 percent.
C)   5 percent.
D)   11 percent.E) All of the above
F) A) and C)

Question 10

Which of the following statements is correct?

Accepted Answer

A)   The CPI can be used to compare dollar figures from different points in time.
B)   The percentage change in the CPI is a measure of the inflation rate,but the percentage change in the GDP deflator is not a measure of the inflation rate.
C)   Compared to the consumer price index (CPI) ,the GDP deflator is the more common gauge of inflation.
D)   The GDP deflator better reflects the goods and services bought by consumers than does the CPI.E) B) and D)
F) All of the above

Question 11

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent.A year later,Bob withdraws his $105.If deflation was 7 percent during the year the money was deposited,then Bob's purchasing power has increased by 12 percent.

Accepted Answer

A) True 
 B)False

Question 12

If the nominal interest rate is 5 percent and the real interest rate is 7 percent,then the inflation rate is

Accepted Answer

A)   -2 percent.
B)   0.4 percent.
C)   2 percent.
D)   12 percent.E) None of the above
F) All of the above

Question 13

Suppose that U.S.mining companies purchase German-made ore trucks at a reduced price.By itself,what effect will this purchase have on the GDP deflator and on the consumer price index?

Accepted Answer

A)   The consumer price index and the GDP deflator will both fall.
B)   The consumer price index and the GDP deflator will both be unaffected.
C)   The consumer price index will fall,and the GDP deflator will be unaffected.
D)   The consumer price index will be unaffected,and the GDP deflator will fall.E) A) and C)
F) All of the above

Question 14

In 1974,one could buy a theater for $1.25.Today the same theater ticket costs $6.50.Which pair of CPIs would imply that the cost in today's dollars was the same for both tickets?

Accepted Answer

A)   60 in 1964 and 390 today
B)   75 in 1964 and 390 today
C)   80 in 1964 and 404 today
D)   95 in 1964 and 475 todayE) None of the above
F) All of the above

Question 15

If the CPI was 120 in 1994,was 126 in 1995,and was 134.82 in 1996,what was the inflation rate in 1995 and in 1996?

Accepted Answer

The inflation rate i...

Question 16

Most,but not all,athletic apparel sold in the United States is imported from other nations.If the price of athletic apparel increases,the GDP deflator will

Accepted Answer

A)   increase less than will the consumer price index.
B)   increase more than will the consumer price index.
C)   not increase,but the consumer price index will increase.
D)   increase,but the consumer price index will not increase.E) None of the above
F) A) and B)

Question 17

Table 11-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below.
 
-Refer to Table 11-12.Suppose Will's 2009 food expenditures in 2011 dollars amounted to $5,670.Suppose also that the real interest rate in 2011 was 3 percent.Then,in 2011,

Accepted Answer

A)   the inflation rate was 8 percent and the nominal interest rate was 5 percent.
B)   the inflation rate was 9 percent and the nominal interest rate was 6 percent.
C)   the inflation rate was 8 percent and the nominal interest rate was 11 percent.
D)   the inflation rate was 9 percent and the nominal interest rate was 12 percent.E) B) and C)
F) A) and B)

Question 18

In the United States,real interest rates were

Accepted Answer

A)   high in the 1970s and 1990s.
B)   low in the 1970s and 1990s.
C)   high in the 1970s and low in the 1990s.
D)   low in the 1970s and high in the 1990s.E) B) and C)
F) All of the above

Question 19

The consumer price index tries to gauge how much incomes must rise to maintain

Accepted Answer

A)   an increasing standard of living.
B)   a constant standard of living.
C)   a decreasing standard of living.
D)   the highest standard of living possible.E) C) and D)
F) B) and D)

Question 20

Which is the most accurate statement about the GDP deflator and the consumer price index?

Accepted Answer

A)   The GDP deflator compares the price of a fixed basket of goods and services to the price of the basket in the base year,whereas the consumer price index compares the price of currently produced goods and services to the price of the same goods and services in the base year.
B)   The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year,whereas the GDP deflator compares the price of currently produced goods and services to the price of the same goods and services in the base year.
C)   Both the GDP deflator and the consumer price index compare the price of a fixed basket of goods and services to the price of the basket in the base year.
D)   Both the GDP deflator and the consumer price index compare the price of currently produced goods and services to the price of the same goods and services in the base year.E) A) and C)
F) B) and C)

Exam 24: Measuring the Cost of Living

If the nominal interest rate is 5 percent and the real interest rate is 7 percent,then the inflation rate is

Correct Answer
verified

Which is the most accurate statement about the GDP deflator and the consumer price index?

Correct Answer
verified

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent,then the real interest rate is

Correct Answer
verified

In general,if a consumer good is produced domestically and consumed domestically,an increase in its price will have which of the following effects?

Correct Answer
verified

Table 11-5 The table below pertains to Napandsnack,an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 11-5.If the base year is 2010,then the economy's inflation rate in 2010 was

Correct Answer
verified

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Correct Answer
verified

The consumer price index tries to gauge how much incomes must rise to maintain

Correct Answer
verified

Correct Answer
verified
a.
The expected real interest rate was 4...
View Answer

Most,but not all,athletic apparel sold in the United States is imported from other nations.If the price of athletic apparel increases,the GDP deflator will

Correct Answer
verified

Suppose the price index was 105 in 2007,115.5 in 2008,and the inflation rate was lower between 2008 and 2009 than it was between 2007 and 2008.This means that

Correct Answer
verified

If the CPI was 120 in 1994,was 126 in 1995,and was 134.82 in 1996,what was the inflation rate in 1995 and in 1996?

Correct Answer
verified
The inflation rate i...
View Answer

The consumer price index was 200 in 2006 and 210 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

Correct Answer
verified

A decrease in the price of domestically produced nuclear reactors will be reflected in

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

List the three major problems in using the CPI as a measure of the cost of living.

Correct Answer
verified
(1)Substitution bias.The CPI ignores the...
View Answer

In 1974,one could buy a theater for $1.25.Today the same theater ticket costs $6.50.Which pair of CPIs would imply that the cost in today's dollars was the same for both tickets?

Correct Answer
verified

In the United States,real interest rates were

Correct Answer
verified

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent.A year later,Bob withdraws his $105.If deflation was 7 percent during the year the money was deposited,then Bob's purchasing power has increased by 12 percent.

Correct Answer
verified

Suppose that U.S.mining companies purchase German-made ore trucks at a reduced price.By itself,what effect will this purchase have on the GDP deflator and on the consumer price index?

Correct Answer
verified

Table 11-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below. -Refer to Table 11-12.Suppose Will's 2009 food expenditures in 2011 dollars amounted to $5,670.Suppose also that the real interest rate in 2011 was 3 percent.Then,in 2011,

Correct Answer
verified

Exam 24: Measuring the Cost of Living

If the nominal interest rate is 5 percent and the real interest rate is 7 percent,then the inflation rate is

Correct AnswerverifiedShow Answer

Which is the most accurate statement about the GDP deflator and the consumer price index?

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent,then the real interest rate is

Correct AnswerverifiedShow Answer

In general,if a consumer good is produced domestically and consumed domestically,an increase in its price will have which of the following effects?

Correct AnswerverifiedShow Answer

Table 11-5 The table below pertains to Napandsnack,an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 11-5.If the base year is 2010,then the economy's inflation rate in 2010 was

Correct AnswerverifiedShow Answer

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Correct AnswerverifiedShow Answer

The consumer price index tries to gauge how much incomes must rise to maintain

Correct AnswerverifiedShow Answer

Correct Answerverifieda.The expected real interest rate was 4...View AnswerShow Answer

Most,but not all,athletic apparel sold in the United States is imported from other nations.If the price of athletic apparel increases,the GDP deflator will

Correct AnswerverifiedShow Answer

Suppose the price index was 105 in 2007,115.5 in 2008,and the inflation rate was lower between 2008 and 2009 than it was between 2007 and 2008.This means that

Correct AnswerverifiedShow Answer

If the CPI was 120 in 1994,was 126 in 1995,and was 134.82 in 1996,what was the inflation rate in 1995 and in 1996?

Correct AnswerverifiedThe inflation rate i...View AnswerShow Answer

The consumer price index was 200 in 2006 and 210 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

Correct AnswerverifiedShow Answer

A decrease in the price of domestically produced nuclear reactors will be reflected in

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

List the three major problems in using the CPI as a measure of the cost of living.

Correct Answerverified(1)Substitution bias.The CPI ignores the...View AnswerShow Answer

In 1974,one could buy a theater for $1.25.Today the same theater ticket costs $6.50.Which pair of CPIs would imply that the cost in today's dollars was the same for both tickets?

Correct AnswerverifiedShow Answer

In the United States,real interest rates were

Correct AnswerverifiedShow Answer

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent.A year later,Bob withdraws his $105.If deflation was 7 percent during the year the money was deposited,then Bob's purchasing power has increased by 12 percent.

Correct AnswerverifiedShow Answer

Suppose that U.S.mining companies purchase German-made ore trucks at a reduced price.By itself,what effect will this purchase have on the GDP deflator and on the consumer price index?

Correct AnswerverifiedShow Answer

Table 11-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below. -Refer to Table 11-12.Suppose Will's 2009 food expenditures in 2011 dollars amounted to $5,670.Suppose also that the real interest rate in 2011 was 3 percent.Then,in 2011,

Correct AnswerverifiedShow Answer

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a.
The expected real interest rate was 4...
View Answer

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The inflation rate i...
View Answer

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(1)Substitution bias.The CPI ignores the...
View Answer

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