Question 1

Kristine has a savings account at a bank.If the nominal interest rate she earns exceeds the rate of inflation,then her purchasing power increases over time.

Accepted Answer

A) True 
 B)False

Question 2

If the CPI was 104 in 1967 and is 390 today,then $10 in 1967 purchased the same amount of goods and services as

Accepted Answer

A)   $2.67 purchases today.
B)   $37.50 purchases today.
C)   $39.00 purchases today.
D)   $104.00 purchases today.E) A) and D)
F) A) and C)

Question 3

Which of the following is not a widely acknowledged problem with using the CPI as a measure of the cost of living?

Accepted Answer

A)   substitution bias
B)   introduction of new goods
C)   unmeasured quality change
D)   unmeasured price changeE) All of the above
F) B) and D)

Question 4

Compute how much each of the following items is worth in terms of today's dollars using 177 as the price index for today.
a.
In 1926,the CPI was 17.7 and the price of a movie ticket was $0.25.
b.
In 1932,the CPI was 13.1 and a cook earned $15.00 a week.
c.
In 1943,the CPI was 17.4 and a gallon of gas cost $0.19.

Accepted Answer

a. The movie ticket is worth $.25177/17....

Question 5

Table 16-2
The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn.
 
-Refer to Table 16-2.The cost of the basket in 2009 was

Accepted Answer

A)   $108.
B)   $147.
C)   $160.
D)   $301.E) A) and B)
F) C) and D)

Question 6

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year,then multiplying by 100.

Accepted Answer

A) True 
 B)False

Question 7

Which of these events would cause the consumer price index to overstate the increase in the cost of living?

Accepted Answer

A)   Car makers benefit from a new technology that allows them to sell higher-quality cars to consumers with no increase in price.
B)   Energy prices decrease,and consumers respond by buying more gas and electricity.
C)   A new good is introduced that renders cellular telephones inferior and obsolete.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 8

For purposes of calculating the CPI,the apparel category of consumer spending includes the cost of

Accepted Answer

A)   clothing,but not footwear or jewelry.
B)   clothing and footwear,but not jewelry.
C)   clothing and jewelry,but not footwear.
D)   clothing,footwear,and jewelry.E) A) and B)
F) A) and D)

Question 9

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000.Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Accepted Answer

A)   80 in Kansas City and 100 in Dallas
B)   125 in Kansas City and 150 in Dallas
C)   100 in Kansas City and 124.5 in Dallas
D)   100 in Kansas City and 140 in DallasE) A) and B)
F) A) and C)

Question 10

Which entity within the U.S.government is responsible for computing and reporting the CPI?

Accepted Answer

A)   the Department of Commerce
B)   the Department of Labor
C)   the General Accounting Office
D)   the Council of Economic AdvisersE) B) and D)
F) B) and C)

Question 11

Suppose a basket of goods and services has been selected to calculate the consumer price index.In 2005,the basket of goods cost $108.00; in 2006,it cost $135.00; and in 2007,it cost $168.75.Which of the following statements is correct?

Accepted Answer

A)   Using 2005 as the base year,the economy's inflation rate was higher in 2007 than it was in 2006.
B)   If 2007 is the base year,then the CPI is 33.75 in 2006.
C)   If the CPI is 156.25 in 2007,then 2005 is the base year.
D)   Using 2005 as the base year,the economy's inflation rate for 2006 was 27 percent.E) C) and D)
F) A) and B)

Question 12

Table 16-2
The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn.
 
-Refer to Table 16-2.The cost of the basket in 2008 was

Accepted Answer

A)   $108.
B)   $147.
C)   $160.
D)   $224.E) All of the above
F) A) and D)

Question 13

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates.From this you conclude

Accepted Answer

A)   there were serious episodes of deflation in the time frame represented on the graph.
B)   consumer prices were always rising in the time frame represented on the graph.
C)   the economy never experienced a recession in the time frame represented on the graph.
D)   GDP was always increasing for the time frame represented on the graph.E) B) and D)
F) B) and C)

Question 14

Consider a small economy in which consumers buy only two goods: pretzels and cookies.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

Accepted Answer

A)   the percentage change in the price of pretzels is equal to the percentage change in the price of cookies from year to year.
B)   the number of pretzels bought by the typical consumer is equal to the number of cookies bought by the typical consumer in each year.
C)   neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year.
D)   neither the price of pretzels nor the price of cookies changes from year to year.E) All of the above
F) None of the above

Question 15

Michelle bought word-processing software in 2009 for $75.Michelle's cousin,Barry,bought an upgrade of the same software in 2010 for $75.To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

A)   substitution bias
B)   unmeasured quality change
C)   introduction of new goods
D)   income biasE) B) and D)
F) B) and C)

Question 16

If the nominal interest rate is 5 percent and the rate of inflation is 9 percent,then the real interest rate is

Accepted Answer

A)   -4 percent.
B)   -0.44 percent.
C)   4 percent.
D)   14 percent.E) All of the above
F) C) and D)

Question 17

In the calculation of the CPI,tea is given greater weight than beer if

Accepted Answer

A)   the price of tea is higher than the price of beer.
B)   it costs more to produce tea than it costs to produce beer.
C)   tea is more readily available than beer to the typical consumer.
D)   consumers buy more tea than beer.E) B) and C)
F) A) and B)

Question 18

Table 16-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below.
 
-Refer to Table 16-12.To the nearest dollar,Will's 2010 food expenditures in 2009 dollars amount to

Accepted Answer

A)   $5,236.
B)   $5,431.
C)   $5,524.
D)   $5,608.E) None of the above
F) A) and B)

Question 19

There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

Accepted Answer

A) True 
 B)False

Question 20

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005.However,the inflation rate was higher between 2004 and 2005 than it was between 2003 and 2004.Which of the following scenarios is consistent with this assumption?

Accepted Answer

A)   The CPI was 100 in 2003,110 in 2004,and 105 in 2005.
B)   The CPI was 100 in 2003,120 in 2004,and 135 in 2005.
C)   The CPI was 100 in 2003,105 in 2004,and 130 in 2005.
D)   The CPI was 100 in 2003,90 in 2004,and 88 in 2005.E) All of the above
F) A) and B)

Exam 16: Measuring the Cost of Living

In the calculation of the CPI,tea is given greater weight than beer if

Correct Answer
verified

There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

Correct Answer
verified

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates.From this you conclude

Correct Answer
verified

If the nominal interest rate is 5 percent and the rate of inflation is 9 percent,then the real interest rate is

Correct Answer
verified

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000.Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Correct Answer
verified

Michelle bought word-processing software in 2009 for $75.Michelle's cousin,Barry,bought an upgrade of the same software in 2010 for $75.To which problem in the construction of the CPI is this situation most relevant?

Correct Answer
verified

For purposes of calculating the CPI,the apparel category of consumer spending includes the cost of

Correct Answer
verified

Which of the following is not a widely acknowledged problem with using the CPI as a measure of the cost of living?

Correct Answer
verified

Correct Answer
verified
a. The movie ticket is worth $.25177/17....
View Answer

Consider a small economy in which consumers buy only two goods: pretzels and cookies.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

Correct Answer
verified

Table 16-2 The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn. -Refer to Table 16-2.The cost of the basket in 2008 was

Correct Answer
verified

Which entity within the U.S.government is responsible for computing and reporting the CPI?

Correct Answer
verified

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005.However,the inflation rate was higher between 2004 and 2005 than it was between 2003 and 2004.Which of the following scenarios is consistent with this assumption?

Correct Answer
verified

Table 16-2 The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn. -Refer to Table 16-2.The cost of the basket in 2009 was

Correct Answer
verified

Kristine has a savings account at a bank.If the nominal interest rate she earns exceeds the rate of inflation,then her purchasing power increases over time.

Correct Answer
verified

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year,then multiplying by 100.

Correct Answer
verified

Which of these events would cause the consumer price index to overstate the increase in the cost of living?

Correct Answer
verified

Table 16-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below. -Refer to Table 16-12.To the nearest dollar,Will's 2010 food expenditures in 2009 dollars amount to

Correct Answer
verified

Suppose a basket of goods and services has been selected to calculate the consumer price index.In 2005,the basket of goods cost $108.00; in 2006,it cost $135.00; and in 2007,it cost $168.75.Which of the following statements is correct?

Correct Answer
verified

If the CPI was 104 in 1967 and is 390 today,then $10 in 1967 purchased the same amount of goods and services as

Correct Answer
verified

Exam 16: Measuring the Cost of Living

In the calculation of the CPI,tea is given greater weight than beer if

Correct AnswerverifiedShow Answer

There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

Correct AnswerverifiedShow Answer

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates.From this you conclude

Correct AnswerverifiedShow Answer

If the nominal interest rate is 5 percent and the rate of inflation is 9 percent,then the real interest rate is

Correct AnswerverifiedShow Answer

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000.Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Correct AnswerverifiedShow Answer

Michelle bought word-processing software in 2009 for $75.Michelle's cousin,Barry,bought an upgrade of the same software in 2010 for $75.To which problem in the construction of the CPI is this situation most relevant?

Correct AnswerverifiedShow Answer

For purposes of calculating the CPI,the apparel category of consumer spending includes the cost of

Correct AnswerverifiedShow Answer

Which of the following is not a widely acknowledged problem with using the CPI as a measure of the cost of living?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The movie ticket is worth $.25177/17....View AnswerShow Answer

Consider a small economy in which consumers buy only two goods: pretzels and cookies.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

Correct AnswerverifiedShow Answer

Table 16-2 The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn. -Refer to Table 16-2.The cost of the basket in 2008 was

Correct AnswerverifiedShow Answer

Which entity within the U.S.government is responsible for computing and reporting the CPI?

Correct AnswerverifiedShow Answer

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005.However,the inflation rate was higher between 2004 and 2005 than it was between 2003 and 2004.Which of the following scenarios is consistent with this assumption?

Correct AnswerverifiedShow Answer

Table 16-2 The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn. -Refer to Table 16-2.The cost of the basket in 2009 was

Correct AnswerverifiedShow Answer

Kristine has a savings account at a bank.If the nominal interest rate she earns exceeds the rate of inflation,then her purchasing power increases over time.

Correct AnswerverifiedShow Answer

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year,then multiplying by 100.

Correct AnswerverifiedShow Answer

Which of these events would cause the consumer price index to overstate the increase in the cost of living?

Correct AnswerverifiedShow Answer

Table 16-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below. -Refer to Table 16-12.To the nearest dollar,Will's 2010 food expenditures in 2009 dollars amount to

Correct AnswerverifiedShow Answer

Suppose a basket of goods and services has been selected to calculate the consumer price index.In 2005,the basket of goods cost $108.00; in 2006,it cost $135.00; and in 2007,it cost $168.75.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If the CPI was 104 in 1967 and is 390 today,then $10 in 1967 purchased the same amount of goods and services as

Correct AnswerverifiedShow Answer

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a. The movie ticket is worth $.25177/17....
View Answer

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