Question 1

Table 24-7. 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 24-7. Between 2009 and 2011, the cost of living increased by

Accepted Answer

A)   6 percent.
B)   19 percent.
C)   14 percent.
D)   17 percent.E) A) and C)
F) B) and C)

Question 2

Which of the following statements is true?

Accepted Answer

A)   Even if we know the values of the consumer price index for the years 2009 and 2010, we cannot calculate the inflation rate for 2010 if we do not know which year is the base year.
B)   If we know the base year is 1990, and if we know the value of the consumer price index for the year 2010, then we have all the information we need to calculate the inflation rate for 2010.
C)   If we know the base year is 2000, and if we know the value of the consumer price index for the year 1995, then we have all the information we need to calculate the inflation rate for 1995.
D)   If we know the base year is 2000, and if we know the value of the consumer price index for the year 1995, then we have all the information we need to calculate the percentage change in the cost of living between 1995 and 2000.E) All of the above
F) None of the above

Question 3

If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal interest rate is 7 percent.

Accepted Answer

A) True 
 B)False

Question 4

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was

Accepted Answer

A)   109.8 and the inflation rate was 9.8%.
B)   109.8 and the inflation rate was 16.9%.
C)   116.9 and the inflation rate was 9.8%.
D)   116.9 and the inflation rate was 16.9%.E) A) and B)
F) A) and C)

Question 5

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 2001 salary in 2006 dollars is

Accepted Answer

A)   $75,000; thus, Ruben's purchasing power increased between 2001 and 2006.
B)   $75,000; thus, Ruben's purchasing power decreased between 2001 and 2006.
C)   $85,000; thus, Ruben's purchasing power increased between 2001 and 2006.
D)   $85,000; thus, Ruben's purchasing power decreased between 2001 and 2006.E) All of the above
F) A) and D)

Question 6

Consternation Corporation has an agreement with its workers to index completely the wage of its employees using the CPI. Consternation Corporation currently pays its production line workers $8.00 an hour and is scheduled to index their wages today. If the CPI is currently 160 and was 128 a year ago, the firm should increase the hourly wages of its workers by

Accepted Answer

A)   $0.25.
B)   $1.60.
C)   $2.00.
D)   $2.56.E) None of the above
F) A) and D)

Question 7

Table 24-11. Megan's salary for three consecutive years, along with other values, are presented in the table below.
 
-Refer to Table 24-11. Suppose the consumer price index for 2013 is not necessarily 235. Then Megan's 2013 salary represents more purchasing power than her 2011 salary as long as the consumer price index for 2013 is

Accepted Answer

A)   greater than 264.25.
B)   less than 264.25.
C)   greater than 258.71.
D)   less than 258.71.E) B) and C)
F) A) and C)

Question 8

By not taking into account the possibility of consumer substitution, the CPI

Accepted Answer

A)   understates the cost of living.
B)   overstates the cost of living.
C)   may overstate or understate the cost of living, depending on how quickly prices rise.
D)   may overstate or understate the cost of living, regardless of how quickly prices rise.E) A) and D)
F) B) and C)

Question 9

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 th...

Question 10

Table 24-6
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 24-6. The cost of the basket

Accepted Answer

A)   increased from 2009 to 2010 and increased from 2010 to 2011.
B)   increased from 2009 to 2010 and decreased from 2010 to 2011.
C)   decreased from 2009 to 2010 and increased from 2010 to 2011.
D)   decreased from 2009 to 2010 and decreased from 2010 to 2011.E) All of the above
F) C) and D)

Question 11

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

Accepted Answer

A)   1970 and lowest in 1980.
B)   1970 and lowest in 1990.
C)   1980 and lowest in 1970.
D)   1980 and lowest in 1990.E) A) and B)
F) None of the above

Question 12

Inflation can be measured using either the GDP deflator or the consumer price index.

Accepted Answer

A) True 
 B)False

Question 13

The consumer price index was 200 in 2012 and 208 in 2013. The nominal interest rate during this period was 9 percent. What was the real interest rate during this period?

Accepted Answer

A)   5.00 percent
B)   1.00 percent
C)   5.15 percent
D)   13.00 percentE) A) and B)
F) C) and D)

Question 14

Which of the following statements is correct?

Accepted Answer

A)   In order to calculate the inflation rate for the year 2011, we need to know the values of the consumer price index for the years 2009, 2010, and 2011.
B)   Changes in the consumer price index are often thought to be useful in predicting changes in the producer price index.
C)   Despite its name, the "consumer price index" really measures the overall cost of the goods and services bought by consumers, business firms, and units of government.
D)   If the prices of all goods and services changed proportionately over time, then the consumer price index would reflect no substitution bias.E) C) and D)
F) A) and B)

Question 15

An increase in the price of Irish whiskey imported into the United States will be reflected in

Accepted Answer

A)   both the U.S. GDP deflator and the U.S. CPI.
B)   neither the U.S. GDP deflator nor the U.S. CPI.
C)   the U.S. GDP deflator, but not the U.S. CPI.
D)   the U.S. CPI, but not the U.S. GDP deflator.E) All of the above
F) None of the above

Question 16

Which of the following is correct?

Accepted Answer

A)   Nominal and real interest rates always move together.
B)   Nominal and real interest rates never move together.
C)   Nominal and real interest rates do not always move together.
D)   Nominal and real interest rates always move in opposite directions.E) All of the above
F) B) and D)

Question 17

The CPI assumes a fixed basket of goods over time. In fact, consumers are likely to change purchasing behavior over time by purchasing less of the goods whose prices have risen by relatively large amounts and by buying more of the goods whose prices have risen less or maybe even fallen. What problem does this cause for measuring the cost of living?

Accepted Answer

This creates a subst...

Question 18

A decrease in the price of large tractors imported into the United States from Russia

Accepted Answer

A)   leaves the GDP deflator unchanged but decreases the consumer price index.
B)   decreases the GDP deflator but leaves the consumer price index unchanged.
C)   decreases both the GDP deflator and the consumer price index.
D)   leaves both the GDP deflator and the consumer price index unchanged.E) None of the above
F) A) and D)

Question 19

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 B)
F) All of the above

Question 20

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) All of the above
F) None of the above

Exam 16: Measuring the Cost of Living

Which of the following is correct?

Correct Answer
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Table 24-7. 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 24-7. Between 2009 and 2011, the cost of living increased by

Correct Answer
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A decrease in the price of large tractors imported into the United States from Russia

Correct Answer
verified

Table 24-6 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 24-6. The cost of the basket

Correct Answer
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The consumer price index was 200 in 2012 and 208 in 2013. The nominal interest rate during this period was 9 percent. What was the real interest rate during this period?

Correct Answer
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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
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Correct Answer
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By not taking into account the possibility of consumer substitution, the CPI

Correct Answer
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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

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was

Correct Answer
verified

Correct Answer
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If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal interest rate is 7 percent.

Correct Answer
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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 2001 salary in 2006 dollars is

Correct Answer
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Which of the following statements is true?

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

Correct Answer
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1) Substitution bias. The CPI ignores th...
View Answer

An increase in the price of Irish whiskey imported into the United States will be reflected in

Correct Answer
verified

Inflation can be measured using either the GDP deflator or the consumer price index.

Correct Answer
verified

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Correct Answer
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This creates a subst...
View Answer

Exam 16: Measuring the Cost of Living

Which of the following is correct?

Correct AnswerverifiedShow Answer

Table 24-7. 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 24-7. Between 2009 and 2011, the cost of living increased by

Correct AnswerverifiedShow Answer

A decrease in the price of large tractors imported into the United States from Russia

Correct AnswerverifiedShow Answer

Table 24-6 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 24-6. The cost of the basket

Correct AnswerverifiedShow Answer

The consumer price index was 200 in 2012 and 208 in 2013. The nominal interest rate during this period was 9 percent. What was the real interest rate during this period?

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

Correct AnswerverifiedShow Answer

By not taking into account the possibility of consumer substitution, the CPI

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

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal interest rate is 7 percent.

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 2001 salary in 2006 dollars is

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct Answerverified1) Substitution bias. The CPI ignores th...View AnswerShow Answer

An increase in the price of Irish whiskey imported into the United States will be reflected in

Correct AnswerverifiedShow Answer

Inflation can be measured using either the GDP deflator or the consumer price index.

Correct AnswerverifiedShow Answer

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThis creates a subst...View AnswerShow Answer

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1) Substitution bias. The CPI ignores th...
View Answer

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This creates a subst...
View Answer