Question 1

Several studies in the 1990s concluded that the consumer price index overstated inflation by about

Accepted Answer

A)  3 percentage points per year, and that number of percentage points likely still applies now.
B)  3 percentage points per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 3 percentage points.
C)  1 percentage point per year, and that number of percentage points likely still applies now.
D)  1 percentage point per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 1 percentage pointE) B) and C)
F) A) and B)

Question 2

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about

Accepted Answer

A)  $2.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
B)  $2.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.
C)  $2.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
D)  $2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.E) All of the above
F) A) and C)

Question 3

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) All of the above

Question 4

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was

Accepted Answer

A)  100 in 2012.
B)  105 in 2013.
C)  109.5 in 2014.
D)  All of the above are correct.E) C) and D)
F) B) and C)

Question 5

When ranking movies by nominal box office receipts, what important fact is overlooked?

Accepted Answer

A)  More people go to movies now than in the past.
B)  There are no good substitutes for movies currently.
C)  Prices, including those for movie tickets, have been rising over time.
D)  Movies and DVD are complements.E) A) and C)
F) B) and C)

Question 6

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. If the base year is 2011, then the CPI

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

Question 7

Table 24-15
​
The following table shows the prices of good X and good Y for 2013-2015. In addition, assume the basket of goods used to compute the Consumer Price Index consists of 3 units of good X and 4 units of good Y.
​  ​
-Refer to Table 24-15. The inflation rate in 2014 was

Accepted Answer

A)  ​57%.
B)  ​63%.
C)  ​70%.
D)  ​75%.E) C) and D)
F) B) and D)

Question 8

The Bureau of Labor Statistics surveys consumers to determine a fixed basket of goods.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements regarding the consumer price index and the GDP deflator is correct?

Accepted Answer

A)  The two price measures are always equal.
B)  Divergence between the two price measures is the rule, not the exception.
C)  Divergence between the two price measures is the exception, not the rule.
D)  None of the above is correct.E) A) and C)
F) A) and B)

Question 10

Table 24-4
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 24-4. The cost of the basket in 2012 was

Accepted Answer

A)  $32.
B)  $200.
C)  $210.
D)  $247.5.E) None of the above
F) B) and D)

Question 11

Suppose the CPI in 1950 was 24.1 and the CPI in 1975 was 53.8.​ When Ken's income rose from $10,000 per year in 1950 to $20,000 per year in 1970, Ken's standard of living improved between 1950 and 1970.

Accepted Answer

A) True 
 B)False

Question 12

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 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 D)
F) B) and C)

Question 13

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements about real and nominal interest rates is correct?

Accepted Answer

A)  Real interest rates can be either positive or negative, but nominal interest rates must be positive.
B)  Real interest rates and nominal interest rates must be positive.
C)  Real interest rates must be positive, but nominal interest rates can be either positive or negative.
D)  Real interest rates and nominal interest rates can be either positive or negative.E) A) and C)
F) A) and D)

Question 15

​The PPI is a price index that measures the cost to consumers of a typical basket of goods sold by firms.

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

By keeping the basket of goods and services the same when computing the CPI, the Bureau of Labor Statistics isolates the effects of price changes from the effect of any quantity changes that might be occurring at the same time.

Accepted Answer

A) True 
 B)False

Question 18

A COLA automatically raises the wage when the CPI rises.

Accepted Answer

A) True 
 B)False

Question 19

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

Accepted Answer

A)  $35,000.00.
B)  $46,666.67.
C)  $61,950.00
D)  $105,000.00.E) B) and C)
F) A) and B)

Question 20

When the quality of a good deteriorates while its price remains the same, the purchasing power of the dollar

Accepted Answer

A)  increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
B)  increases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
C)  decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
D)  decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.E) B) and C)
F) A) and B)

Exam 24: Measuring the Cost of Living

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was

Correct AnswerverifiedShow Answer

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about

Correct AnswerverifiedShow Answer

By keeping the basket of goods and services the same when computing the CPI, the Bureau of Labor Statistics isolates the effects of price changes from the effect of any quantity changes that might be occurring at the same time.

Correct AnswerverifiedShow Answer

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

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 consumer price index is

Correct AnswerverifiedShow Answer

A COLA automatically raises the wage when the CPI rises.

Correct AnswerverifiedShow Answer

​The PPI is a price index that measures the cost to consumers of a typical basket of goods sold by firms.

Correct AnswerverifiedShow Answer

Suppose the CPI in 1950 was 24.1 and the CPI in 1975 was 53.8.​ When Ken's income rose from $10,000 per year in 1950 to $20,000 per year in 1970, Ken's standard of living improved between 1950 and 1970.

Correct AnswerverifiedShow Answer

The Bureau of Labor Statistics surveys consumers to determine a fixed basket of goods.

Correct AnswerverifiedShow 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

Table 24-4 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 24-4. The cost of the basket in 2012 was

Correct AnswerverifiedShow Answer

Several studies in the 1990s concluded that the consumer price index overstated inflation by about

Correct AnswerverifiedShow Answer

Which of the following statements about real and nominal interest rates is correct?

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. If the base year is 2011, then the CPI

Correct AnswerverifiedShow Answer

Table 24-15 ​ The following table shows the prices of good X and good Y for 2013-2015. In addition, assume the basket of goods used to compute the Consumer Price Index consists of 3 units of good X and 4 units of good Y. ​ ​ -Refer to Table 24-15. The inflation rate in 2014 was

Correct AnswerverifiedShow Answer

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.

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

When the quality of a good deteriorates while its price remains the same, the purchasing power of the dollar

Correct AnswerverifiedShow Answer

When ranking movies by nominal box office receipts, what important fact is overlooked?

Correct AnswerverifiedShow Answer

Which of the following statements regarding the consumer price index and the GDP deflator is correct?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The PPI is a price index that measures the cost to consumers of a typical basket of goods sold by firms.

Correct Answer
verified

Suppose the CPI in 1950 was 24.1 and the CPI in 1975 was 53.8. When Ken's income rose from $10,000 per year in 1950 to $20,000 per year in 1970, Ken's standard of living improved between 1950 and 1970.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Table 24-15 The following table shows the prices of good X and good Y for 2013-2015. In addition, assume the basket of goods used to compute the Consumer Price Index consists of 3 units of good X and 4 units of good Y. -Refer to Table 24-15. The inflation rate in 2014 was

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified