Question 1

If the quality of a good improves while its price remains the same, then the value of a dollar

Accepted Answer

A) rises and the cost of living increases. 
B) rises and the cost of living decreases. 
C) falls and the cost of living increases. 
D) falls and the cost of living decreases. 
A) rises and the cost of living increases. 
B) rises and the cost of living decreases. 
C) falls and the cost of living increases. 
D) falls and the cost of living decreases.

Question 2

Suppose that the price of one ear of corn was $0.05 in 1920, that the CPI in 1920 was 10, and that in 1990 the CPI was 180. What is the price of a 1920 ear of corn in 1990 dollars?

Accepted Answer

The price of a 1920

Question 3

As long as prices are rising over time, then

Accepted Answer

A) the nominal interest rate exceeds the real interest rate. 
B) the real interest rate exceeds the nominal interest rate. 
C) the real interest rate is positive. 
D) the nominal interest rate is a better indicator than the real interest rate of how fast the purchasing power of your bank account is changing over time. 
A) the nominal interest rate exceeds the real interest rate. 
B) the real interest rate exceeds the nominal interest rate. 
C) the real interest rate is positive. 
D) the nominal interest rate is a better indicator than the real interest rate of how fast the purchasing power of your bank account is changing over time.

Question 4

Consternation Corporation has an agreement with its workers to index completely the wage of its employees using the CPI. Consternation Corporation currently pays its production line workers $8.00 an hour and is scheduled to index their wages today. If the CPI is currently 160 and was 128 a year ago, the firm should increase the hourly wages of its workers by

Accepted Answer

A) $0.25. 
B) $1.60. 
C) $2.00. 
D) $2.56. 
A) $0.25. 
B) $1.60. 
C) $2.00. 
D) $2.56.

Question 5

From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the inflation rate for medical care?

Accepted Answer

A) 5.7 percent 
B) 6.0 percent 
C) 9.0 percent 
D) 59.0 percent 
A) 5.7 percent 
B) 6.0 percent 
C) 9.0 percent 
D) 59.0 percent

Question 6

Inflation can be measured using either the GDP deflator or the consumer price index.

Accepted Answer

A) True 
 B)False

Question 7

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was

Accepted Answer

A) 100.0. 
B) 100.7. 
C) 83.3. 
D) 84.6. 
A) 100.0. 
B) 100.7. 
C) 83.3. 
D) 84.6.

Question 8

The CPI differs from the GDP deflator in that

Accepted Answer

A) the CPI is an inflation index, while the GDP deflator is a price index. 
B) substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator. 
C) increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the GDP deflator but not in the CPI. 
D) increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI. 
A) the CPI is an inflation index, while the GDP deflator is a price index. 
B) substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator. 
C) increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the GDP deflator but not in the CPI. 
D) increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI.

Question 9

The consumer price index is

Accepted Answer

A) not very useful as a measure of the cost of living. 
B) a perfect measure of the cost of living. 
C) a useful measure, but not a perfect measure, of the cost of living. 
D) not used as a measure of the cost of living. 
A) not very useful as a measure of the cost of living. 
B) a perfect measure of the cost of living. 
C) a useful measure, but not a perfect measure, of the cost of living. 
D) not used as a measure of the cost of living.

Question 10

Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn.  
-Refer to Table 24-3. The cost of the basket in 2013 was

Accepted Answer

A) $150.50. 
B) $147. 
C) $154. 
D) $301. 
A) $150.50. 
B) $147. 
C) $154. 
D) $301.

Question 11

During a certain year, the nominal interest rate was 8 percent, the real interest rate was 3 percent, and the CPI was 176.7 at the beginning of the year. The CPI at the end of the year was

Accepted Answer

A) 196.1. 
B) 185.5. 
C) 168.3. 
D) 159.2. 
A) 196.1. 
B) 185.5. 
C) 168.3. 
D) 159.2.

Question 12

If the price of domestically produced power tools increases, then

Accepted Answer

A) the consumer price index and the GDP deflator will both increase. 
B) the consumer price index will increase, and the GDP deflator will be unaffected. 
C) the consumer price index will be unaffected, and the GDP deflator will increase. 
D) the consumer price index and the GDP deflator will both be unaffected. 
A) the consumer price index and the GDP deflator will both increase. 
B) the consumer price index will increase, and the GDP deflator will be unaffected. 
C) the consumer price index will be unaffected, and the GDP deflator will increase. 
D) the consumer price index and the GDP deflator will both be unaffected.

Question 13

In addition to the consumer price index, the Bureau of Labor Statistics also calculates the

Accepted Answer

A) macroeconomic price index. 
B) producer price index. 
C) rental unit price index. 
D) terms of trade. 
A) macroeconomic price index. 
B) producer price index. 
C) rental unit price index. 
D) terms of trade.

Question 14

If the cost of housing increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Accepted Answer

A) 1.7 percent. 
B) 3.3 percent. 
C) 4.2 percent. 
D) 10 percent. 
A) 1.7 percent. 
B) 3.3 percent. 
C) 4.2 percent. 
D) 10 percent.

Question 15

Table 24-8
The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers.  
-Refer to Table 24-8. If the base year is 2013, then the economy's inflation rate in 2014 is

Accepted Answer

A) 11.1 percent. 
B) 200 percent. 
C) 10 percent. 
D) 90 percent. 
A) 11.1 percent. 
B) 200 percent. 
C) 10 percent. 
D) 90 percent.

Question 16

When box office receipts are not corrected for inflation,

Accepted Answer

A) The Sound of Music ranks as the most popular movie of all time. 
B) Gone with the Wind does not rank as one of the 50 most popular movies of all time. 
C) Titanic ranks as the most popular movie of all time. 
D) Avatar does not rank as one of the 50 most popular movies of all time. 
A) The Sound of Music ranks as the most popular movie of all time. 
B) Gone with the Wind does not rank as one of the 50 most popular movies of all time. 
C) Titanic ranks as the most popular movie of all time. 
D) Avatar does not rank as one of the 50 most popular movies of all time.

Question 17

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, Josh Holloway's income amounts to about what percentage of Sue Holloway's income?

Accepted Answer

A) 71 percent 
B) 141 percent 
C) 165 percent 
D) 198 percent 
A) 71 percent 
B) 141 percent 
C) 165 percent 
D) 198 percent

Question 18

If the CPI was 108.00 in 1942 and is 336.96 today, then $10 in 1942 purchased the same amount of goods and services as

Accepted Answer

A) $2.57 purchases today. 
B) $28.89 purchases today. 
C) $31.20 purchases today. 
D) $38.89 purchases today. 
A) $2.57 purchases today. 
B) $28.89 purchases today. 
C) $31.20 purchases today. 
D) $38.89 purchases today.

Question 19

You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in 1962 prices?

Accepted Answer

A) sixty cents   (today's CPI - 1962 CPI) 
B) sixty cents   (1962 CPI - today's CPI) 
C) sixty cents   (today's CPI / 1962 CPI) 
D) sixty cents   (1962 CPI / today's CPI) 
A) sixty cents   (today's CPI - 1962 CPI) 
B) sixty cents   (1962 CPI - today's CPI) 
C) sixty cents   (today's CPI / 1962 CPI) 
D) sixty cents   (1962 CPI / today's CPI)

Question 20

Each week, the Bureau of Labor Statistics computes and reports the consumer price index.

Accepted Answer

A) True 
 B)False

Exam 24: Measuring the Cost of Living

If the quality of a good improves while its price remains the same, then the value of a dollar

Suppose that the price of one ear of corn was $0.05 in 1920, that the CPI in 1920 was 10, and that in 1990 the CPI was 180. What is the price of a 1920 ear of corn in 1990 dollars?

As long as prices are rising over time, then

From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the inflation rate for medical care?

Inflation can be measured using either the GDP deflator or the consumer price index.

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was

The CPI differs from the GDP deflator in that

The consumer price index is

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. The cost of the basket in 2013 was

During a certain year, the nominal interest rate was 8 percent, the real interest rate was 3 percent, and the CPI was 176.7 at the beginning of the year. The CPI at the end of the year was

If the price of domestically produced power tools increases, then

In addition to the consumer price index, the Bureau of Labor Statistics also calculates the

If the cost of housing increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. -Refer to Table 24-8. If the base year is 2013, then the economy's inflation rate in 2014 is

When box office receipts are not corrected for inflation,

If the CPI was 108.00 in 1942 and is 336.96 today, then $10 in 1942 purchased the same amount of goods and services as

You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in 1962 prices?

Each week, the Bureau of Labor Statistics computes and reports the consumer price index.

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

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