Question 1

Table 11-3
The table below pertains to Studious,an economy in which the typical consumer's basket consists of 5 books and 10 calculators.
 
-Refer to Table 11-3.If 2008 is the base year,then the consumer price index was

Accepted Answer

A)   64.5 in 2006,87.1 in 2007,and 100 in 2008.
B)   64.5 in 2006,270 in 2007,and 310 in 2008.
C)   200 in 2006,87.1 in 2007,and 100 in 2008.
D)   200 in 2006,270 in 2007,and 310 in 2008.E) A) and B)
F) None of the above

Question 2

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent,then the inflation rate is

Accepted Answer

A)   -2.5 percent.
B)   0.45 percent.
C)   2.5 percent.
D)   13.5 percent.E) B) and C)
F) A) and B)

Question 3

The price index was 220 in one year and 260 in the next year.What was the inflation rate?

Accepted Answer

A)   9.0 percent
B)   114.6 percent
C)   18.2 percent
D)   40.0 percentE) All of the above
F) A) and D)

Question 4

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2006 salary in 2001 dollars is

Accepted Answer

A)   $20,000;thus,Ruben's purchasing power increased between 2001 and 2006.
B)   $20,000;thus,Ruben's purchasing power decreased between 2001 and 2006.
C)   $64,000;thus,Ruben's purchasing power increased between 2001 and 2006.
D)   $64,000;thus,Ruben's purchasing power decreased between 2001 and 2006.E) A) and C)
F) All of the above

Question 5

Suppose lawn mowers are part of the market basket used to compute the CPI.Suppose also that the quality of lawn mowers deteriorates while the price of lawn mowers stays the same.If the Bureau of Labor Statistics is able to precisely adjust the CPI for the improvement in quality,then,other things equal,

Accepted Answer

A)   the CPI will rise.
B)   the CPI will fall.
C)   the CPI will stay the same.
D)   lawn mowers will no longer be included in the market basket.E) A) and D)
F) B) and C)

Question 6

The CPI differs from the GDP deflator in that

Accepted Answer

A)   the CPI is a price index,while the GDP deflator is an inflation index.
B)   substitution bias is not a problem with the CPI,but it is a problem with the GDP deflator.
C)   increases in the prices of foreign produced goods that are sold to U.S.consumers show up in the CPI but not in the GDP deflator.
D)   increases in the prices of domestically produced goods that are sold to the U.S.government show up in the CPI but not in the GDP deflator.E) C) and D)
F) A) and B)

Question 7

If the nominal interest rates rises,then the inflation rate must have increased.

Accepted Answer

A) True 
 B)False

Question 8

The price index was 150 in the first year,160 in the second year,and 175 in the third year.The inflation rate was about

Accepted Answer

A)   6.25 percent between the first and second years,and 8.6 percent between the second and third years.
B)   6.7 percent between the first and second years,and 9.4 percent between the second and third years.
C)   10 percent between the first and second years,and 15 percent between the second and third years.
D)   60 percent between the first and second years,and 75 percent between the second and third years.E) None of the above
F) A) and C)

Question 9

If the nominal interest rate is 6 percent and the rate of inflation is 4 percent,then the real interest rate is

Accepted Answer

A)   -4 percent.
B)   2 percent.
C)   4 percent.
D)   8 percent.E) A) and C)
F) B) and C)

Question 10

The CPI differs from the GDP deflator in that

Accepted Answer

A)   the CPI is an inflation index,while the GDP deflator is a price index.
B)   substitution bias is not a problem with the CPI,but it is a problem with the GDP deflator.
C)   increases in the prices of foreign produced goods that are sold to U.S.consumers show up in the GDP deflator but not in the CPI.
D)   increases in the prices of domestically produced goods that are sold to the U.S.government show up in the GDP deflator but not in the CPI.E) B) and C)
F) A) and D)

Question 11

The primary purpose of measuring the overall level of prices in the economy is to

Accepted Answer

A)   allow for the measurement of GDP.
B)   allow consumers to know what kinds of prices to expect in the future.
C)   allow for the comparison of dollar figures from different points in time.
D)   allow for the comparison of dollar figures from the same point in time.E) B) and C)
F) B) and D)

Question 12

When the consumer price index falls,the typical family

Accepted Answer

A)   has to spend more dollars to maintain the same standard of living.
B)   can spend fewer dollars to maintain the same standard of living.
C)   finds that its standard of living is not affected.
D)   can save less because they do not need to offset the effects of rising prices.E) A) and B)
F) All of the above

Question 13

The price index that measures the cost of a basket of goods and services bought by firms is called the

Accepted Answer

A)   industrial price index.
B)   producer price index.
C)   core price index.
D)   GDP deflator.E) B) and C)
F) A) and D)

Question 14

Table 11-6.The table below applies to an economy with only two goods - hamburgers and hot dogs.The fixed basket consists of 4 hamburgers and 8 hot dogs.
 
-Refer to Table 11-6.If the base year is 2010,then the consumer price index is

Accepted Answer

A)   100 in 2009,109 in 2010,and 115 in 2011.
B)   95.90 in 2009,100 in 2010,and 107.44 in 2011.
C)   90.91 in 2009,100 in 2010,and 106.36 in 2011.
D)   88.82 in 2009,100 in 2010,and 107.44 in 2011.E) A) and C)
F) C) and D)

Question 15

If the cost of housing increases by 10 percent,then,other things the same,the CPI is likely to increase by about

Accepted Answer

A)   1.7 percent.
B)   3.3 percent.
C)   4.2 percent.
D)   10 percent.E) None of the above
F) A) and D)

Question 16

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Accepted Answer

A)   Economists agree that the bias in the CPI is a very serious problem.
B)   Economists agree that the bias in the CPI is not a serious problem.
C)   Economists agree on the severity of the CPI bias,but there is still debate on what to do about it.
D)   There is still debate among economists on the severity of the CPI bias and what to do about it.E) A) and B)
F) A) and C)

Question 17

Table 11-4
The table below pertains to Wrexington,an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys.
 
-Refer to Table 11-4.If the base year is 2004,then the CPI

Accepted Answer

A)   increased from 2004 to 2005 and increased from 2005 to 2006.
B)   increased from 2004 to 2005 and decreased from 2005 to 2006.
C)   decreased from 2004 to 2005 and increased from 2005 to 2006.
D)   decreased from 2004 to 2005 and decreased from 2005 to 2006.E) C) and D)
F) A) and B)

Question 18

In the United States,if the price of imported oil rises so that the prices of gasoline and heating oil rise,then the

Accepted Answer

A)   GDP deflator rises much more than does the consumer price index.
B)   consumer price index rises much more than does the GDP deflator.
C)   GDP deflator and the consumer price index rise by about the same amount.
D)   consumer price index rises slightly more than does the GDP deflator.E) A) and D)
F) A) and C)

Question 19

Data from the Bureau of Labor Statistics show that consumer spending on transportation is only slightly higher than consumer spending on food and beverages.

Accepted Answer

A) True 
 B)False

Question 20

In 1972,one could buy model rocket engines for $1.50 each.If those same engines cost $2.50 each today,then which pair of CPIs would make the engine prices in today's dollars the same for both years?

Accepted Answer

A)   60 in 1972 and 95 today
B)   60 in 1972 and 120 today
C)   90 in 1972 and 150 today
D)   96 in 1972 and 154 todayE) A) and B)
F) A) and C)

Exam 24: Measuring the Cost of Living

The price index was 150 in the first year,160 in the second year,and 175 in the third year.The inflation rate was about

Correct Answer
verified

Data from the Bureau of Labor Statistics show that consumer spending on transportation is only slightly higher than consumer spending on food and beverages.

Correct Answer
verified

If the nominal interest rates rises,then the inflation rate must have increased.

Correct Answer
verified

In 1972,one could buy model rocket engines for $1.50 each.If those same engines cost $2.50 each today,then which pair of CPIs would make the engine prices in today's dollars the same for both years?

Correct Answer
verified

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Correct Answer
verified

Table 11-6.The table below applies to an economy with only two goods - hamburgers and hot dogs.The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 11-6.If the base year is 2010,then the consumer price index is

Correct Answer
verified

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent,then the inflation rate is

Correct Answer
verified

Table 11-3 The table below pertains to Studious,an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 11-3.If 2008 is the base year,then the consumer price index was

Correct Answer
verified

The CPI differs from the GDP deflator in that

Correct Answer
verified

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2006 salary in 2001 dollars is

Correct Answer
verified

If the cost of housing increases by 10 percent,then,other things the same,the CPI is likely to increase by about

Correct Answer
verified

When the consumer price index falls,the typical family

Correct Answer
verified

If the nominal interest rate is 6 percent and the rate of inflation is 4 percent,then the real interest rate is

Correct Answer
verified

The primary purpose of measuring the overall level of prices in the economy is to

Correct Answer
verified

In the United States,if the price of imported oil rises so that the prices of gasoline and heating oil rise,then the

Correct Answer
verified

The price index was 220 in one year and 260 in the next year.What was the inflation rate?

Correct Answer
verified

The CPI differs from the GDP deflator in that

Correct Answer
verified

Table 11-4 The table below pertains to Wrexington,an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 11-4.If the base year is 2004,then the CPI

Correct Answer
verified

The price index that measures the cost of a basket of goods and services bought by firms is called the

Correct Answer
verified

Correct Answer
verified

Exam 24: Measuring the Cost of Living

The price index was 150 in the first year,160 in the second year,and 175 in the third year.The inflation rate was about

Correct AnswerverifiedShow Answer

Data from the Bureau of Labor Statistics show that consumer spending on transportation is only slightly higher than consumer spending on food and beverages.

Correct AnswerverifiedShow Answer

If the nominal interest rates rises,then the inflation rate must have increased.

Correct AnswerverifiedShow Answer

In 1972,one could buy model rocket engines for $1.50 each.If those same engines cost $2.50 each today,then which pair of CPIs would make the engine prices in today's dollars the same for both years?

Correct AnswerverifiedShow Answer

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Correct AnswerverifiedShow Answer

Table 11-6.The table below applies to an economy with only two goods - hamburgers and hot dogs.The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 11-6.If the base year is 2010,then the consumer price index is

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent,then the inflation rate is

Correct AnswerverifiedShow Answer

Table 11-3 The table below pertains to Studious,an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 11-3.If 2008 is the base year,then the consumer price index was

Correct AnswerverifiedShow Answer

The CPI differs from the GDP deflator in that

Correct AnswerverifiedShow Answer

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2006 salary in 2001 dollars is

Correct AnswerverifiedShow Answer

If the cost of housing increases by 10 percent,then,other things the same,the CPI is likely to increase by about

Correct AnswerverifiedShow Answer

When the consumer price index falls,the typical family

Correct AnswerverifiedShow Answer

If the nominal interest rate is 6 percent and the rate of inflation is 4 percent,then the real interest rate is

Correct AnswerverifiedShow Answer

The primary purpose of measuring the overall level of prices in the economy is to

Correct AnswerverifiedShow Answer

In the United States,if the price of imported oil rises so that the prices of gasoline and heating oil rise,then the

Correct AnswerverifiedShow Answer

The price index was 220 in one year and 260 in the next year.What was the inflation rate?

Correct AnswerverifiedShow Answer

The CPI differs from the GDP deflator in that

Correct AnswerverifiedShow Answer

Table 11-4 The table below pertains to Wrexington,an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 11-4.If the base year is 2004,then the CPI

Correct AnswerverifiedShow Answer

The price index that measures the cost of a basket of goods and services bought by firms is called the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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