Question 1

Suppose the quality of beef changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be least severe?

Accepted Answer

A)   The quality of beef deteriorates and beef becomes more expensive relative to other goods.
B)   The quality of beef deteriorates and beef becomes less expensive relative to other goods.
C)   The quality of beef improves and beef becomes more expensive relative to other goods.
D)   The quality of beef improves and the price of beef relative to other prices remains unchanged.E) A) and B)
F) B) and D)

Question 2

If the CPI increased from 215 to 218 between the years 2012 and 2013, while the nominal interest rate increased from 3.25% to 3.80%, what is the real interest rate in 2013?

Accepted Answer

The answer of If the CPI increased from 215 to...

Question 3

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below.
 
-Refer to Table 24-12. Will's 2009 food expenditures in 2010 dollars amount to

Accepted Answer

A)   $5,500.
B)   $5,250.
C)   $4,975.
D)   $3,625.E) A) and C)
F) B) and C)

Question 4

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

Question 5

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator.

Accepted Answer

A) True 
 B)False

Question 6

Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013.
-Refer to Scenario 24-3. In real terms, Sue Holloway's income amounts to about what percentage of Josh Holloway's income?

Accepted Answer

A)   11.0 percent
B)   65.2 percent
C)   70.9 percent
D)   114.7 percentE) A) and B)
F) C) and D)

Question 7

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

Accepted Answer

A) True 
 B)False

Question 8

The real interest rate tells you how fast the purchasing power of your bank account rises over time.

Accepted Answer

A) True 
 B)False

Question 9

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 2 percent.

Accepted Answer

A) True 
 B)False

Question 10

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) C) and D)
F) A) and D)

Question 11

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) None of the above
F) B) and C)

Question 12

If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent, then the real interest rate is

Accepted Answer

A)   -7.5 percent.
B)   -2.5 percent.
C)   2.5 percent.
D)   7.5 percent.E) A) and C)
F) A) and B)

Question 13

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) C) and D)

Question 14

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

Accepted Answer

The inflat...

Question 15

From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education between 2009 and 2010?

Accepted Answer

A)   0.9%
B)   9.0%
C)   2.5%
D)   90%E) All of the above
F) C) and D)

Question 16

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

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

Question 17

With respect to the consumer price index, which of the following does not serve as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

Accepted Answer

A)   rises from $0.80 to $1.00 while the price of a loaf of bread rises from $2.00 to $2.50.
B)   rises from $1.00 to $1.30 while the price of a loaf of bread rises from $2.00 to $2.30.
C)   remains constant, while the price of a loaf of bread rises from $2.00 to $2.30.
D)   falls from $1.00 to $0.80 while the price of a loaf of bread falls from $2.00 to $1.80.E) A) and B)
F) A) and C)

Question 18

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

Accepted Answer

A)   -5 percent.
B)   -1 percent.
C)   5 percent.
D)   3.2 percent.E) All of the above
F) B) and D)

Question 19

Why does the GDP deflator give a different rate of inflation than the CPI?

Accepted Answer

The GDP deflator and the CPI differ in t...

Question 20

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was the real interest rate during this period?

Accepted Answer

A)   3 percent
B)   2 percent
C)   3.3 percent
D)   12.8 percentE) B) and C)
F) A) and C)

Exam 16: Measuring the Cost of Living

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

Correct Answer
verified
The inflat...
View 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 Answer
verified

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was the real interest rate during this period?

Correct Answer
verified

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator.

Correct Answer
verified

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

Correct Answer
verified

With respect to the consumer price index, which of the following does not serve as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

Correct Answer
verified

Correct Answer
verified

Suppose the quality of beef changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be least severe?

Correct Answer
verified

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Correct Answer
verified

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

Correct Answer
verified

From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education between 2009 and 2010?

Correct Answer
verified

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 2 percent.

Correct Answer
verified

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

Correct Answer
verified

The real interest rate tells you how fast the purchasing power of your bank account rises over time.

Correct Answer
verified

If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent, then the real interest rate is

Correct Answer
verified

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 Answer
verified

Why does the GDP deflator give a different rate of inflation than the CPI?

Correct Answer
verified
The GDP deflator and the CPI differ in t...
View Answer

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Will's 2009 food expenditures in 2010 dollars amount to

Correct Answer
verified

If the CPI increased from 215 to 218 between the years 2012 and 2013, while the nominal interest rate increased from 3.25% to 3.80%, what is the real interest rate in 2013?

Correct Answer
verified

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 Answer
verified

Exam 16: Measuring the Cost of Living

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

Correct AnswerverifiedThe inflat...View AnswerShow 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

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was the real interest rate during this period?

Correct AnswerverifiedShow Answer

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

With respect to the consumer price index, which of the following does not serve as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the quality of beef changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be least severe?

Correct AnswerverifiedShow Answer

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Correct AnswerverifiedShow Answer

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

Correct AnswerverifiedShow Answer

From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education between 2009 and 2010?

Correct AnswerverifiedShow Answer

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 2 percent.

Correct AnswerverifiedShow Answer

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

Correct AnswerverifiedShow Answer

The real interest rate tells you how fast the purchasing power of your bank account rises over time.

Correct AnswerverifiedShow Answer

If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent, then the real interest rate is

Correct AnswerverifiedShow Answer

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

Why does the GDP deflator give a different rate of inflation than the CPI?

Correct AnswerverifiedThe GDP deflator and the CPI differ in t...View AnswerShow Answer

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Will's 2009 food expenditures in 2010 dollars amount to

Correct AnswerverifiedShow Answer

If the CPI increased from 215 to 218 between the years 2012 and 2013, while the nominal interest rate increased from 3.25% to 3.80%, what is the real interest rate in 2013?

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

Correct Answer
verified
The inflat...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The GDP deflator and the CPI differ in t...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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