Question 1

The CPI and the GDP deflator

Accepted Answer

A)  generally move together.
B)  generally show different patterns of movement.
C)  always show identical changes.
D)  always show different patterns of movement.E) None of the above
F) A) and B)

Question 2

If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced

Accepted Answer

A)  10 percent inflation between years 1 and 2 ,and 5 percent inflation between years 2 and 3.
B)  10 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.
C)  11.1 percent inflation between years 1 and 2, and 5 percent inflation between years 2 and 3.
D)  11.1 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.E) All of the above
F) B) and C)

Question 3

In 1974, one could buy a theater ticket 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) A) and B)
F) B) and C)

Question 4

List the five steps for calculating the consumer price index and inflation rate.

Accepted Answer

(1) Survey consumers to determine a fixe...

Question 5

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that

Accepted Answer

A)  the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 2 percent.
B)  the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 8 percent.
C)  the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 2 percent.
D)  the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 5 percent.E) A) and B)
F) A) and C)

Question 6

Elizabeth just received her Ph.D. in economics and has two competing job offers. The first is in Washington, D.C. and pays a salary of $200,000. She has a similar job offer in Austin, TX that pays $90,000. Which pair of CPIs would make the two salaries have the same purchasing power?

Accepted Answer

A)  70 in Washington, D.C. and 42 in Austin, TX
B)  140 in Washington, D.C. and 70 in Austin, TX
C)  160 in Washington, D.C. and 72 in Austin, TX
D)  210 in Washington, D.C. and 150 in Austin, TXE) B) and C)
F) A) and D)

Question 7

Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. 
-Refer to Table 24-3. The cost of the basket in 2012 was

Accepted Answer

A)  $108.
B)  $116.
C)  $112.
D)  $224.E) C) and D)
F) None of the above

Question 8

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. If the base year is 2010, then the economy's inflation rate in 2010 is

Accepted Answer

A)  8 percent.
B)  10 percent.
C)  10.91 percent.
D)  11.11 percent.E) None of the above
F) All of the above

Question 9

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) None of the above

Question 10

The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?

Accepted Answer

A)  1.04 percent
B)  4.41 percent
C)  6.00 percent
D)  42.00 percentE) A) and C)
F) All of the above

Question 11

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.

Accepted Answer

A) True 
 B)False

Question 12

​Table 24-14
​
The following table shows some values of the Consumer Price Index and the corresponding inflation rates for 2012-2015.
​ 
-Refer to Table 24-14. The value of the Consumer Price Index in 2014 was approximately

Accepted Answer

A)  ​234.6.
B)  ​235.0.
C)  ​236.7.
D)  ​236.9.E) All of the above
F) None of the above

Question 13

If the cost of medical care increases by 40 percent, then, other things the same, the CPI is likely to increase by about

Accepted Answer

A)  0.9 percent.
B)  3.2 percent.
C)  8.0 percent.
D)  40 percent.E) A) and B)
F) B) and D)

Question 14

Michael Jordan's rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9, while the CPI in 2010 was 218.1. What is Michael Jordan's rookie salary in 2010 dollars?

Accepted Answer

The answer of Michael Jordan's rookie salary in 1984 was...

Question 15

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Accepted Answer

A)  fails to account for consumer spending on housing.
B)  accounts only for consumer spending on food, clothing, and energy.
C)  fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods.
D)  fails to account for the introduction of new goods.E) A) and B)
F) All of the above

Question 16

If the nominal interest rate is 4 percent and the real interest rate is -2.5 percent, then the inflation rate is

Accepted Answer

A)  -6.5 percent.
B)  -1.5 percent.
C)  1.5 percent.
D)  6.5 percent.E) All of the above
F) C) and D)

Question 17

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) A) and B)
F) A) and C)

Question 18

Table 24-2
The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. 
-Refer to Table 24-2. If 2013 is the base year, then the CPI for 2013 was

Accepted Answer

A)  95.7.
B)  100.0.
C)  90.0.
D)  213.6.E) All of the above
F) A) and C)

Question 19

What basket of goods and services is used to construct the CPI?

Accepted Answer

A)  a random sample of all goods and services produced in the economy
B)  the goods and services that are typically bought by consumers as determined by government surveys
C)  only food, clothing, transportation, entertainment, and education
D)  the least expensive and the most expensive goods and services in each major category of consumer expendituresE) A) and D)
F) All of the above

Question 20

If 2010 is the base year, then the inflation rate in 2015 equals

Accepted Answer

A)   
B)   
C)   
D)   E) None of the above
F) All of the above

Exam 24: Measuring the Cost of Living

The CPI and the GDP deflator

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. If the base year is 2010, then the economy's inflation rate in 2010 is

Correct AnswerverifiedShow Answer

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that

Correct AnswerverifiedShow Answer

​Table 24-14 ​ The following table shows some values of the Consumer Price Index and the corresponding inflation rates for 2012-2015. ​ -Refer to Table 24-14. The value of the Consumer Price Index in 2014 was approximately

Correct AnswerverifiedShow Answer

If the cost of medical care increases by 40 percent, then, other things the same, the CPI is likely to increase by about

Correct AnswerverifiedShow Answer

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.

Correct AnswerverifiedShow Answer

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2013 is the base year, then the CPI for 2013 was

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced

Correct AnswerverifiedShow Answer

Michael Jordan's rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9, while the CPI in 2010 was 218.1. What is Michael Jordan's rookie salary in 2010 dollars?

Correct AnswerverifiedShow Answer

If 2010 is the base year, then the inflation rate in 2015 equals

Correct AnswerverifiedShow Answer

If the nominal interest rate is 4 percent and the real interest rate is -2.5 percent, then the inflation rate is

Correct AnswerverifiedShow Answer

The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?

Correct AnswerverifiedShow Answer

What basket of goods and services is used to construct the CPI?

Correct AnswerverifiedShow Answer

Elizabeth just received her Ph.D. in economics and has two competing job offers. The first is in Washington, D.C. and pays a salary of $200,000. She has a similar job offer in Austin, TX that pays $90,000. Which pair of CPIs would make the two salaries have the same purchasing power?

Correct AnswerverifiedShow Answer

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. The cost of the basket in 2012 was

Correct AnswerverifiedShow Answer

In 1974, one could buy a theater ticket 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

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

Correct AnswerverifiedShow Answer

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Correct AnswerverifiedShow Answer

List the five steps for calculating the consumer price index and inflation rate.

Correct Answerverified(1) Survey consumers to determine a fixe...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Table 24-14 The following table shows some values of the Consumer Price Index and the corresponding inflation rates for 2012-2015. -Refer to Table 24-14. The value of the Consumer Price Index in 2014 was approximately

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
(1) Survey consumers to determine a fixe...
View Answer