Question 1

For any given year, what is the CPI?

Accepted Answer

A)  the price of the basket of goods and services in the given year divided by the price of the basket in the base year, then multiplied by 100 
B)  the price of the basket of goods and services in the given year divided by the price of the basket in the previous year, then multiplied by 100 
C)  the price of the basket of goods and services in the base year divided by the price of the basket in the given year, then multiplied by 100 
D)  the price of the basket of goods and services in the previous year divided by the price of the basket in the given year, then multiplied by 100 
A)  the price of the basket of goods and services in the given year divided by the price of the basket in the base year, then multiplied by 100 
B)  the price of the basket of goods and services in the given year divided by the price of the basket in the previous year, then multiplied by 100 
C)  the price of the basket of goods and services in the base year divided by the price of the basket in the given year, then multiplied by 100 
D)  the price of the basket of goods and services in the previous year divided by the price of the basket in the given year, then multiplied by 100

Question 2

-Refer to Table 6-3. What was the inflation rate, as measured by the CPI, between 2018 and 2019?

Accepted Answer

A)  36.36 percent 
B)  55.4 percent 
C)  77.8 percent 
D)  140.2 percent 
A)  36.36 percent 
B)  55.4 percent 
C)  77.8 percent 
D)  140.2 percent

Question 3

Wayne takes a job in 1985 at a salary of $10,000. By 2019, he has been promoted, with a salary of $70,000. If the price index in 1985 is 50, and the price index in 2019 is 200, what is Wayne's 2019 salary in 1985 dollars?

Accepted Answer

A)  $2,500 
B)  $17,500 
C)  $35,000 
D)  $40,000 
A)  $2,500 
B)  $17,500 
C)  $35,000 
D)  $40,000

Question 4

Which of the following makes up the smallest category of consumer spending in Canada?

Accepted Answer

A)  food 
B)  transportation 
C)  alcoholic beverages and tobacco products 
D)  shelter 
A)  food 
B)  transportation 
C)  alcoholic beverages and tobacco products 
D)  shelter

Question 5

Which statement best characterizes the consumer price index?

Accepted Answer

A)  It is a measure of a nation's standard of living. 
B)  It shows production of consumer goods. 
C)  It measures the increase in the prices of all final goods and services produced within the borders of a country. 
D)  It is an imperfect measure of the cost of living. 
A)  It is a measure of a nation's standard of living. 
B)  It shows production of consumer goods. 
C)  It measures the increase in the prices of all final goods and services produced within the borders of a country. 
D)  It is an imperfect measure of the cost of living.

Question 6

If this year the CPI is 125 and last year it was 120, what do we know?

Accepted Answer

A)  Most goods have become more expensive. 
B)  The price level has increased. 
C)  The inflation rate has increased. 
D)  Some goods have become cheaper. 
A)  Most goods have become more expensive. 
B)  The price level has increased. 
C)  The inflation rate has increased. 
D)  Some goods have become cheaper.

Question 7

In 1972 in Kelowna, BC, one could buy model rocket engines for $1.50. If those same engines cost $3.00 today, which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

Accepted Answer

A)  60 in 1972 and 100 today 
B)  60 in 1972 and 110 today 
C)  60 in 1972 and 120 today 
D)  60 in 1972 and 130 today 
A)  60 in 1972 and 100 today 
B)  60 in 1972 and 110 today 
C)  60 in 1972 and 120 today 
D)  60 in 1972 and 130 today

Question 8

In the CPI, how are goods and services weighted?

Accepted Answer

A)  according to how much consumers buy of each item 
B)  according to whether the goods and services are necessities or luxuries 
C)  according to the levels of production of the goods and services in the domestic economy 
D)  according to the expenditures on them in the GDP national income accounts 
A)  according to how much consumers buy of each item 
B)  according to whether the goods and services are necessities or luxuries 
C)  according to the levels of production of the goods and services in the domestic economy 
D)  according to the expenditures on them in the GDP national income accounts

Question 9

What does the GDP deflator reflect?

Accepted Answer

A)  the level of prices in the base year relative to the current level of prices 
B)  the current level of prices relative to the level of prices in the base year 
C)  the level of real output in the base year relative to the current level of real output 
D)  the current level of real output relative to the level of real output in the base year 
A)  the level of prices in the base year relative to the current level of prices 
B)  the current level of prices relative to the level of prices in the base year 
C)  the level of real output in the base year relative to the current level of real output 
D)  the current level of real output relative to the level of real output in the base year

Question 10

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, what is the real interest rate?

Accepted Answer

A)  -11 percent 
B)  -5 percent 
C)  5 percent 
D)  11 percent 
A)  -11 percent 
B)  -5 percent 
C)  5 percent 
D)  11 percent

Question 11

Canadians spend about 27 percent of their total expenditures on housing. If the price of housing increases by 10 percent, by how much does the CPI increase?

Accepted Answer

A)  0.27 percent 
B)  2.7 percent 
C)  27 percent 
D)  270 percent 
A)  0.27 percent 
B)  2.7 percent 
C)  27 percent 
D)  270 percent

Question 12

-Refer to Table 6-4. Of those categories, which one had the lowest rate of inflation?

Accepted Answer

A)  food and beverages 
B)  housing 
C)  gasoline 
D)  transportation 
A)  food and beverages 
B)  housing 
C)  gasoline 
D)  transportation

Question 13

Babe Ruth's 1931 salary was $80,000. The price index for 1931 is 16 and the price index for the current year is 210. What would Ruth's 1931 salary be equivalent to in the current year?

Accepted Answer

A)  $536,000 
B)  $635,000 
C)  $828,000 
D)  $1,050,000 
A)  $536,000 
B)  $635,000 
C)  $828,000 
D)  $1,050,000

Question 14

When the quality of a good improves, what happens to the purchasing power of the dollar?

Accepted Answer

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

Question 15

Andrew is offered a job in Calgary where the CPI is 130 and a job in Toronto where the CPI is 180. Andrew's job offer in Calgary is for $65,000. Which salary would the Toronto job have to pay so that both jobs have the same purchasing power?

Accepted Answer

A)  $52,000 
B)  $60,266 
C)  $65,625 
D)  $90,000 
A)  $52,000 
B)  $60,266 
C)  $65,625 
D)  $90,000

Question 16

If the nominal interest rate is 2 percent and the rate of inflation is 6 percent, what is the real interest rate?

Accepted Answer

A)  -8 percent 
B)  -4 percent 
C)  4 percent 
D)  8 percent 
A)  -8 percent 
B)  -4 percent 
C)  4 percent 
D)  8 percent

Question 17

If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 3 percent.

Accepted Answer

A) True 
 B)False

Question 18

Diane is offered a job in Charlottetown that pays $100,000. She is also offered a job in Halifax that pays $124,500. Which set of CPIs comes closest to giving both salaries the same purchasing power?

Accepted Answer

A)  83.3 in Charlottetown and 100 in Halifax 
B)  89.3 in Charlottetown and 100 in Halifax 
C)  100 in Charlottetown and 124.5 in Halifax 
D)  100 in Charlottetown and 140 in Halifax 
A)  83.3 in Charlottetown and 100 in Halifax 
B)  89.3 in Charlottetown and 100 in Halifax 
C)  100 in Charlottetown and 124.5 in Halifax 
D)  100 in Charlottetown and 140 in Halifax

Question 19

If the consumer price index was 100 in the base year and 112 the following year, what was the inflation rate?

Accepted Answer

A)  1.2 percent 
B)  11.2 percent 
C)  12 percent 
D)  112 percent 
A)  1.2 percent 
B)  11.2 percent 
C)  12 percent 
D)  112 percent

Question 20

Scenario 6-1
Grant Smith was a doctor. In 1944, he made $12,000. His daughter, Lisa Smith, is also a doctor. Last year she made $275,000. The price index in 1944 was 17.6 and the price index last year was 200.
-Refer to Scenario 6-1. What is Lisa's income in 1944 dollars?

Accepted Answer

A)  $15,667 
B)  $17,401 
C)  $19,322 
D)  $24,200 
A)  $15,667 
B)  $17,401 
C)  $19,322 
D)  $24,200

For any given year, what is the CPI?

-Refer to Table 6-3. What was the inflation rate, as measured by the CPI, between 2018 and 2019?

Wayne takes a job in 1985 at a salary of $10,000. By 2019, he has been promoted, with a salary of $70,000. If the price index in 1985 is 50, and the price index in 2019 is 200, what is Wayne's 2019 salary in 1985 dollars?

Which of the following makes up the smallest category of consumer spending in Canada?

Which statement best characterizes the consumer price index?

If this year the CPI is 125 and last year it was 120, what do we know?

In 1972 in Kelowna, BC, one could buy model rocket engines for $1.50. If those same engines cost $3.00 today, which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

In the CPI, how are goods and services weighted?

What does the GDP deflator reflect?

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, what is the real interest rate?

Canadians spend about 27 percent of their total expenditures on housing. If the price of housing increases by 10 percent, by how much does the CPI increase?

-Refer to Table 6-4. Of those categories, which one had the lowest rate of inflation?

Babe Ruth's 1931 salary was $80,000. The price index for 1931 is 16 and the price index for the current year is 210. What would Ruth's 1931 salary be equivalent to in the current year?

When the quality of a good improves, what happens to the purchasing power of the dollar?

Andrew is offered a job in Calgary where the CPI is 130 and a job in Toronto where the CPI is 180. Andrew's job offer in Calgary is for $65,000. Which salary would the Toronto job have to pay so that both jobs have the same purchasing power?

If the nominal interest rate is 2 percent and the rate of inflation is 6 percent, what is the real interest rate?

If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 3 percent.

Diane is offered a job in Charlottetown that pays $100,000. She is also offered a job in Halifax that pays $124,500. Which set of CPIs comes closest to giving both salaries the same purchasing power?

If the consumer price index was 100 in the base year and 112 the following year, what was the inflation rate?

Scenario 6-1 Grant Smith was a doctor. In 1944, he made $12,000. His daughter, Lisa Smith, is also a doctor. Last year she made $275,000. The price index in 1944 was 17.6 and the price index last year was 200. -Refer to Scenario 6-1. What is Lisa's income in 1944 dollars?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 6: Measuring the Cost of Living

For any given year, what is the CPI?

-Refer to Table 6-3. What was the inflation rate, as measured by the CPI, between 2018 and 2019?

Wayne takes a job in 1985 at a salary of $10,000. By 2019, he has been promoted, with a salary of $70,000. If the price index in 1985 is 50, and the price index in 2019 is 200, what is Wayne's 2019 salary in 1985 dollars?

Which of the following makes up the smallest category of consumer spending in Canada?

Which statement best characterizes the consumer price index?

If this year the CPI is 125 and last year it was 120, what do we know?

In 1972 in Kelowna, BC, one could buy model rocket engines for $1.50. If those same engines cost $3.00 today, which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

In the CPI, how are goods and services weighted?

What does the GDP deflator reflect?

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, what is the real interest rate?

Canadians spend about 27 percent of their total expenditures on housing. If the price of housing increases by 10 percent, by how much does the CPI increase?

-Refer to Table 6-4. Of those categories, which one had the lowest rate of inflation?

Babe Ruth's 1931 salary was $80,000. The price index for 1931 is 16 and the price index for the current year is 210. What would Ruth's 1931 salary be equivalent to in the current year?

When the quality of a good improves, what happens to the purchasing power of the dollar?

Andrew is offered a job in Calgary where the CPI is 130 and a job in Toronto where the CPI is 180. Andrew's job offer in Calgary is for $65,000. Which salary would the Toronto job have to pay so that both jobs have the same purchasing power?

If the nominal interest rate is 2 percent and the rate of inflation is 6 percent, what is the real interest rate?

If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 3 percent.

Diane is offered a job in Charlottetown that pays $100,000. She is also offered a job in Halifax that pays $124,500. Which set of CPIs comes closest to giving both salaries the same purchasing power?

If the consumer price index was 100 in the base year and 112 the following year, what was the inflation rate?

Scenario 6-1 Grant Smith was a doctor. In 1944, he made $12,000. His daughter, Lisa Smith, is also a doctor. Last year she made $275,000. The price index in 1944 was 17.6 and the price index last year was 200. -Refer to Scenario 6-1. What is Lisa's income in 1944 dollars?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters