Question 1

The price of milk increases dramatically, causing a 0.5 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

Accepted Answer

A)   more than 0.5 percent.
B)   less than 0.5 percent.
C)   0.5 percent.
D)   None of the above is correct; this particular price increase will not affect the GDP deflator.E) A) and C)
F) C) and D)

Question 2

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

Accepted Answer

1) Survey consumers to determine a fixed...

Question 3

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent, then the real interest rate is

Accepted Answer

A)   -16 percent.
B)   -4 percent.
C)   4 percent.
D)   16 percent.E) B) and C)
F) A) and D)

Question 4

Reports on the current consumer price index are released every

Accepted Answer

A)   quarter.
B)   two weeks.
C)   month.
D)   week.E) None of the above
F) All of the above

Question 5

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

Accepted Answer

A)   151.4
B)   81.4
C)   55.1
D)   122.9E) B) and C)
F) A) and D)

Question 6

In the late 1970s, U.S. nominal interest rates were high and real interest rates were low, but in the late 1990s, U.S. nominal interest rates were low and real interest rates were high.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

Accepted Answer

A)   the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 6 percent.
B)   the dollar value of savings increased at 4 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 4 percent.
D)   the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 6 percent.E) B) and D)
F) A) and B)

Question 9

In general, if a consumer good is produced domestically and consumed domestically, a decrease in its price will have which of the following effects?

Accepted Answer

A)   The consumer price index will decrease relatively more than will the GDP deflator.
B)   The consumer price index and the GDP deflator will decrease by the same amount.
C)   The consumer price index will decrease relatively less than will the GDP deflator.
D)   One cannot generalize about the decrease in the consumer price index relative to the decrease in the GDP deflator.E) A) and B)
F) A) and C)

Question 10

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

Accepted Answer

A)   $5,296.
B)   $1,128,421
C)   $1,208,421
D)   $17,152,000E) All of the above
F) A) and D)

Question 11

In a period of inflation real interest rates will be greater than nominal interest rates.

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. Which of the following scenarios is consistent with this statement? "The cost of living increased by 25 percent between 2009 and 2011."

Accepted Answer

A)   The price of a hot dog was $2.24 rather than $3.00 in 2009, with other prices in the table remaining fixed.
B)   The price of a hot dog was $4.07 rather than $3.63 in 2011, with other prices in the table remaining fixed..
C)   The price of a hamburger was $4.24 rather than $5.00 in 2009, with other prices in the table remaining fixed.
D)   The price of a hamburger was $5.96 rather than $5.61 in 2011, with other prices in the table remaining fixed.E) B) and C)
F) B) and D)

Question 13

Between October 2014 and October 2015, the CPI in Canada rose from 120 to 124 and the CPI in Mexico rose from 210 to 229.1. What were the inflation rates for Canada and Mexico over this one-year period?

Accepted Answer

A)   3.3 percent for Canada and 9.1 percent for Mexico
B)   3.3 percent for Canada and 8.3 percent for Mexico
C)   3.2 percent for Canada and 9.1 percent for Mexico
D)   3.2 percent for Canada and 8.3 percent for MexicoE) All of the above
F) B) and C)

Question 14

The price index was 128 in 2013, and the inflation rate was 24 percent between 2012 and 2013. The price index in 2012 was

Accepted Answer

A)   104.0.
B)   103.2.
C)   158.7.
D)   152.0.E) A) and B)
F) A) and C)

Question 15

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) A) and B)
F) All of the above

Question 16

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. Josh Holloway's 2013 income in 1944 dollars is

Accepted Answer

A)   $11,528.
B)   $16,923.
C)   $149,009.
D)   $26,059.E) A) and B)
F) A) and C)

Question 17

One of the differences between the GDP deflator and the consumer price index is

Accepted Answer

A)   the GDP deflator includes income earned by American citizens working in foreign countries and the consumer price index is based solely on purchases made in the U.S.
B)   the consumer price index basket of goods is updated constantly by the Bureau of Labor Statistics whereas the GDP deflator is updated only occasionally.
C)   the consumer price index includes items not included in the GDP deflator such as airplanes purchased by the Air Force.
D)   the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers.E) All of the above
F) B) and C)

Question 18

Suppose the quality of televisions 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 most severe?

Accepted Answer

A)   The quality of televisions deteriorates and televisions become more expensive relative to other goods.
B)   The quality of televisions improves and televisions become less expensive relative to other goods.
C)   The quality of televisions improves and televisions become more expensive relative to other goods.
D)   The quality of televisions deteriorates and the price of televisions relative to other prices remains unchanged.E) A) and D)
F) None of the above

Question 19

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 $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was

Accepted Answer

A)   98.0.
B)   102.0.
C)   104.0.
D)   151.0.E) None of the above
F) A) and D)

Question 20

Table 24-16
The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year.
 
-Refer to Table 24-16. Calculate the missing value that belongs in space C.

Accepted Answer

The answer of Table 24-16
The table below lists annual consumer...

Exam 11: Measuring the Cost of Living

In general, if a consumer good is produced domestically and consumed domestically, a decrease in its price will have which of the following effects?

Correct Answer
verified

Table 24-16 The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year. -Refer to Table 24-16. Calculate the missing value that belongs in space C.

Correct Answer
verified

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

Correct Answer
verified

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. Josh Holloway's 2013 income in 1944 dollars is

Correct Answer
verified

The price of milk increases dramatically, causing a 0.5 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

Correct Answer
verified

Suppose the quality of televisions 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 most severe?

Correct Answer
verified

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

Correct Answer
verified

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent, then the real interest rate is

Correct Answer
verified

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

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 $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was

Correct Answer
verified

Reports on the current consumer price index are released every

Correct Answer
verified

Correct Answer
verified

One of the differences between the GDP deflator and the consumer price index is

Correct Answer
verified

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 Answer
verified

The price index was 128 in 2013, and the inflation rate was 24 percent between 2012 and 2013. The price index in 2012 was

Correct Answer
verified

Between October 2014 and October 2015, the CPI in Canada rose from 120 to 124 and the CPI in Mexico rose from 210 to 229.1. What were the inflation rates for Canada and Mexico over this one-year period?

Correct Answer
verified

In the late 1970s, U.S. nominal interest rates were high and real interest rates were low, but in the late 1990s, U.S. nominal interest rates were low and real interest rates were high.

Correct Answer
verified

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

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

In a period of inflation real interest rates will be greater than nominal interest rates.

Correct Answer
verified

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

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

Exam 11: Measuring the Cost of Living

In general, if a consumer good is produced domestically and consumed domestically, a decrease in its price will have which of the following effects?

Correct AnswerverifiedShow Answer

Table 24-16 The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year. -Refer to Table 24-16. Calculate the missing value that belongs in space C.

Correct AnswerverifiedShow Answer

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

Correct AnswerverifiedShow Answer

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. Josh Holloway's 2013 income in 1944 dollars is

Correct AnswerverifiedShow Answer

The price of milk increases dramatically, causing a 0.5 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

Correct AnswerverifiedShow Answer

Suppose the quality of televisions 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 most severe?

Correct AnswerverifiedShow Answer

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

Correct AnswerverifiedShow Answer

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent, then the real interest rate is

Correct AnswerverifiedShow Answer

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

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 $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was

Correct AnswerverifiedShow Answer

Reports on the current consumer price index are released every

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One of the differences between the GDP deflator and the consumer price index is

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

The price index was 128 in 2013, and the inflation rate was 24 percent between 2012 and 2013. The price index in 2012 was

Correct AnswerverifiedShow Answer

Between October 2014 and October 2015, the CPI in Canada rose from 120 to 124 and the CPI in Mexico rose from 210 to 229.1. What were the inflation rates for Canada and Mexico over this one-year period?

Correct AnswerverifiedShow Answer

In the late 1970s, U.S. nominal interest rates were high and real interest rates were low, but in the late 1990s, U.S. nominal interest rates were low and real interest rates were high.

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

In a period of inflation real interest rates will be greater than nominal interest rates.

Correct AnswerverifiedShow Answer

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

Correct Answerverified1) Survey consumers to determine a fixed...View AnswerShow Answer

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

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