Question 1

If the nominal interest rate is 4 percent and the real interest rate is 7 percent, then the inflation rate is

Accepted Answer

A) -3 percent. 
B) 0.75 percent. 
C) 3 percent. 
D) 11 percent. 
A) -3 percent. 
B) 0.75 percent. 
C) 3 percent. 
D) 11 percent.

Question 2

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

Accepted Answer

A) GDP will increase in 2011. 
B) the producer price index will increase by more than 1.5 percent in 2011. 
C) interest rates will decrease in the future. 
D) the consumer price index will increase in the future. 
A) GDP will increase in 2011. 
B) the producer price index will increase by more than 1.5 percent in 2011. 
C) interest rates will decrease in the future. 
D) the consumer price index will increase in the future.

Question 3

Core CPI is​

Accepted Answer

A) ​the CPI including only food, clothing, and energy. 
B) ​the CPI including only food and energy. 
C) ​the CPI excluding food, clothing, and energy. 
D) ​the CPI excluding food and energy. 
A) ​the CPI including only food, clothing, and energy. 
B) ​the CPI including only food and energy. 
C) ​the CPI excluding food, clothing, and energy. 
D) ​the CPI excluding food and energy.

Question 4

Suppose the Tooth Fairy paid 50 cents for a tooth in 1970. The CPI in 1970 was 38.8, while the CPI in 2010 was 218.1. What is the value of the Tooth Fairy's payment in 2010 dollars?

Accepted Answer

The answer of Suppose the Tooth Fairy paid 50 cents...

Question 5

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. The cost of the basket in 2012 was

Accepted Answer

A) $200. 
B) $225. 
C) $235. 
D) $212.50. 
A) $200. 
B) $225. 
C) $235. 
D) $212.50.

Question 6

Table 24-11. Megan's salary for three consecutive years, along with other values, is presented in the table below.  
-Refer to Table 24-11. Suppose the consumer price index for 2013 is not necessarily 235. If the nominal interest rate for 2013 is 7.3 percent , then the consumer price index for 2013 is, in fact,

Accepted Answer

A) 239.1. 
B) 235.5. 
C) 242.7. 
D) 250.9. 
A) 239.1. 
B) 235.5. 
C) 242.7. 
D) 250.9.

Question 7

If the cost of apparel increases by 50 percent, then, other things the same, the CPI is likely to increase by about

Accepted Answer

A) 0.5 percent. 
B) 1.5 percent. 
C) 3.0 percent. 
D) 11.8 percent. 
A) 0.5 percent. 
B) 1.5 percent. 
C) 3.0 percent. 
D) 11.8 percent.

Question 8

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Accepted Answer

A) Sophia will have 3 percent more money, which will purchase 5 percent more goods. 
B) Sophia will have 3 percent more money, which will purchase 7 percent more goods. 
C) Sophia will have 5 percent more money, which will purchase 3 percent more goods. 
D) Sophia will have 5 percent more money, which will purchase 7 percent more goods. 
A) Sophia will have 3 percent more money, which will purchase 5 percent more goods. 
B) Sophia will have 3 percent more money, which will purchase 7 percent more goods. 
C) Sophia will have 5 percent more money, which will purchase 3 percent more goods. 
D) Sophia will have 5 percent more money, which will purchase 7 percent more goods.

Question 9

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

Accepted Answer

A) The two measures are constructed differently, but they always indicate the same inflation rate. 
B) The substitution bias applies equally to both measures. 
C) A change in the price of Korean televisions is reflected in the U.S. consumer price index but not in the U.S. GDP deflator. 
D) All of the above are correct. 
A) The two measures are constructed differently, but they always indicate the same inflation rate. 
B) The substitution bias applies equally to both measures. 
C) A change in the price of Korean televisions is reflected in the U.S. consumer price index but not in the U.S. GDP deflator. 
D) All of the above are correct.

Question 10

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 2012 is the base year, then the inflation rate in 2013 was

Accepted Answer

A) 23.5 percent. 
B) 1.04 percent. 
C) 10 percent. 
D) 4.4 percent. 
A) 23.5 percent. 
B) 1.04 percent. 
C) 10 percent. 
D) 4.4 percent.

Question 11

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2006 salary in 2001 dollars is

Accepted Answer

A) $47,768.36. 
B) $63,214.29. 
C) $84,550.00. 
D) $142,768.36. 
A) $47,768.36. 
B) $63,214.29. 
C) $84,550.00. 
D) $142,768.36.

Question 12

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. 
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.

Question 13

A Korean steel company produces steel in the United States, with some of its steel being exported to other nations and some of it being sold within the United States. If the prices of this steel increase, then

Accepted Answer

A) the GDP deflator and the CPI will both increase. 
B) the GDP deflator will increase and the CPI will be unchanged. 
C) the GDP deflator will be unchanged and the CPI will increase. 
D) the GDP deflator and the CPI will both be unchanged. 
A) the GDP deflator and the CPI will both increase. 
B) the GDP deflator will increase and the CPI will be unchanged. 
C) the GDP deflator will be unchanged and the CPI will increase. 
D) the GDP deflator and the CPI will both be unchanged.

Question 14

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 Mexico 
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 Mexico

Question 15

The relative importance of housing in the breakdown of consumer spending is

Accepted Answer

A) 42 percent. 
B) 15 percent. 
C) 6 percent. 
D) 4 percent. 
A) 42 percent. 
B) 15 percent. 
C) 6 percent. 
D) 4 percent.

Question 16

Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys.  
-Refer to Table 24-5. The inflation rate was

Accepted Answer

A) negative in 2005 and negative in 2006. 
B) negative in 2005 and positive in 2006. 
C) positive in 2005 and negative in 2006. 
D) positive in 2005 and positive in 2006. 
A) negative in 2005 and negative in 2006. 
B) negative in 2005 and positive in 2006. 
C) positive in 2005 and negative in 2006. 
D) positive in 2005 and positive in 2006.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

For an imaginary economy, the consumer price index was 115.00 in 2004, 126.50 in 2005, and 136.62 in 2006. Which of the following statements is correct?

Accepted Answer

A) For this economy, the base year must be 2004. 
B) If the basket of goods that is used to calculate the CPI cost $75.00 in the base year, then that basket of goods cost $115.00 in 2004. 
C) This economy's rate of inflation for 2006 is 10.12 percent. 
D) None of the above is correct. 
A) For this economy, the base year must be 2004. 
B) If the basket of goods that is used to calculate the CPI cost $75.00 in the base year, then that basket of goods cost $115.00 in 2004. 
C) This economy's rate of inflation for 2006 is 10.12 percent. 
D) None of the above is correct.

Question 19

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2009 spending in 2014 dollars is about

Accepted Answer

A) $43,290. 
B) $37,143. 
C) $40,950. 
D) $40,857. 
A) $43,290. 
B) $37,143. 
C) $40,950. 
D) $40,857.

Question 20

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 inflation rate was

Accepted Answer

A) 24.3 percent in 2013 and 22.5 percent in 2014. 
B) 23.8 percent in 2013 and 9.5 percent in 2014. 
C) 23.8 percent in 2013 and 7.7 percent in 2014. 
D) 24.3 percent in 2013 and 7.3 percent in 2014. 
A) 24.3 percent in 2013 and 22.5 percent in 2014. 
B) 23.8 percent in 2013 and 9.5 percent in 2014. 
C) 23.8 percent in 2013 and 7.7 percent in 2014. 
D) 24.3 percent in 2013 and 7.3 percent in 2014.

Exam 24: Measuring the Cost of Living

If the nominal interest rate is 4 percent and the real interest rate is 7 percent, then the inflation rate is

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

Core CPI is​

Suppose the Tooth Fairy paid 50 cents for a tooth in 1970. The CPI in 1970 was 38.8, while the CPI in 2010 was 218.1. What is the value of the Tooth Fairy's payment in 2010 dollars?

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. The cost of the basket in 2012 was

If the cost of apparel increases by 50 percent, then, other things the same, the CPI is likely to increase by about

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

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 2012 is the base year, then the inflation rate in 2013 was

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2006 salary in 2001 dollars is

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

A Korean steel company produces steel in the United States, with some of its steel being exported to other nations and some of it being sold within the United States. If the prices of this steel increase, then

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?

The relative importance of housing in the breakdown of consumer spending is

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. The inflation rate was

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

For an imaginary economy, the consumer price index was 115.00 in 2004, 126.50 in 2005, and 136.62 in 2006. Which of the following statements is correct?

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2009 spending in 2014 dollars is about

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 inflation rate was

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Core CPI is