Question 1

In the basket of goods that is used to compute the consumer price index, the three largest categories of consumer spending are

Accepted Answer

A) housing, transportation, and recreation. 
B) housing, transportation, and food & beverages. 
C) housing, food & beverages, and education & communication. 
D) housing, medical care, and education & communication. 
A) housing, transportation, and recreation. 
B) housing, transportation, and food & beverages. 
C) housing, food & beverages, and education & communication. 
D) housing, medical care, and education & communication.

Question 2

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 cost of the basket

Accepted Answer

A) increased by $8 from 2012 to 2013. 
B) increased by $41 from 2012 to 2013. 
C) increased by $50 from 2012 to 2013. 
D) increased by $60 from 2012 to 2013. 
A) increased by $8 from 2012 to 2013. 
B) increased by $41 from 2012 to 2013. 
C) increased by $50 from 2012 to 2013. 
D) increased by $60 from 2012 to 2013.

Question 3

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 percent 
A) 3 percent 
B) 2 percent 
C) 3.3 percent 
D) 12.8 percent

Question 4

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 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Accepted Answer

A) True 
 B)False

Question 5

Of Social Security benefits and federal income tax brackets, which is indexed?

Accepted Answer

A) Both are indexed. 
B) Only Social Security benefits are indexed. 
C) Only federal income tax brackets are indexed. 
D) Neither is indexed. 
A) Both are indexed. 
B) Only Social Security benefits are indexed. 
C) Only federal income tax brackets are indexed. 
D) Neither is indexed.

Question 6

In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007?

Accepted Answer

A) $0.83 
B) $2.25 
C) $2.50 
D) $3.00 
A) $0.83 
B) $2.25 
C) $2.50 
D) $3.00

Question 7

Table 24-10
The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats.  
-Refer to Table 24-10. If 2009 is the base year, then the consumer price index was

Accepted Answer

A) 83.00 in 2008, 100.00 in 2009, and 132.50 in 2010. 
B) 89.97 in 2008, 100.00 in 2009, and 117.43 in 2010. 
C) 90.88 in 2008, 100.00 in 2009, and 117.43 in 2010. 
D) 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010. 
A) 83.00 in 2008, 100.00 in 2009, and 132.50 in 2010. 
B) 89.97 in 2008, 100.00 in 2009, and 117.43 in 2010. 
C) 90.88 in 2008, 100.00 in 2009, and 117.43 in 2010. 
D) 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.

Question 8

Which of the following is the correct formula for calculating the consumer price index?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 9

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 10

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Accepted Answer

A) fails to measure all changes in the quality of goods. 
B) displays a housing bias. 
C) accounts for changes in prices of some goods, but prices of certain goods are assumed to remain constant. 
D) All of the above are correct. 
A) fails to measure all changes in the quality of goods. 
B) displays a housing bias. 
C) accounts for changes in prices of some goods, but prices of certain goods are assumed to remain constant. 
D) All of the above are correct.

Question 11

Jake loaned Elwood $5,000 for one year at a nominal interest rate of 10 percent. After Elwood repaid the loan in full, Jake complained that he could buy 4 percent fewer goods with the money Elwood gave him than he could before he loaned Elwood the $5,000. From this, we can conclude that the rate of inflation during the year was

Accepted Answer

A) -4 percent. 
B) 4 percent. 
C) 6 percent. 
D) 14 percent. 
A) -4 percent. 
B) 4 percent. 
C) 6 percent. 
D) 14 percent.

Question 12

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. If 2013 is the base year, then the CPI for 2013 was

Accepted Answer

A) 75.3. 
B) 100.0. 
C) 116.0. 
D) 132.8. 
A) 75.3. 
B) 100.0. 
C) 116.0. 
D) 132.8.

Question 13

Suppose the CPI was 56 in 1967, and suppose one must spend $349 today to obtain the same basket of goods and services that could be bought for $100 in 1967. Then today's CPI is

Accepted Answer

A) 223.7. 
B) 195.0. 
C) 623.2. 
D) 195.4. 
A) 223.7. 
B) 195.0. 
C) 623.2. 
D) 195.4.

Question 14

For purposes of calculating the CPI, the transportation category of consumer spending includes the cost of

Accepted Answer

A) subways. 
B) gasoline. 
C) both subways and gasoline. 
D) neither subways nor gasoline. 
A) subways. 
B) gasoline. 
C) both subways and gasoline. 
D) neither subways nor gasoline.

Question 15

When the relative price of a good increases, consumers respond by buying

Accepted Answer

A) a larger quantity of that good and a larger quantity of substitutes for that good. 
B) a larger quantity of that good and a smaller quantity of substitutes for that good. 
C) a smaller quantity of that good and a larger quantity of substitutes for that good. 
D) a smaller quantity of that good and a smaller quantity of substitutes for that good. 
A) a larger quantity of that good and a larger quantity of substitutes for that good. 
B) a larger quantity of that good and a smaller quantity of substitutes for that good. 
C) a smaller quantity of that good and a larger quantity of substitutes for that good. 
D) a smaller quantity of that good and a smaller quantity of substitutes for that good.

Question 16

For purposes of calculating the CPI, the apparel category of consumer spending includes the cost of

Accepted Answer

A) clothing, but not footwear or jewelry. 
B) clothing and footwear, but not jewelry. 
C) clothing and jewelry, but not footwear. 
D) clothing, footwear, and jewelry. 
A) clothing, but not footwear or jewelry. 
B) clothing and footwear, but not jewelry. 
C) clothing and jewelry, but not footwear. 
D) clothing, footwear, and jewelry.

Question 17

An increase in the price of bread produced domestically will be reflected in

Accepted Answer

A) both the GDP deflator and the consumer price index. 
B) neither the GDP deflator nor the consumer price index. 
C) the GDP deflator but not in the consumer price index. 
D) the consumer price index but not in the GDP deflator. 
A) both the GDP deflator and the consumer price index. 
B) neither the GDP deflator nor the consumer price index. 
C) the GDP deflator but not in the consumer price index. 
D) the consumer price index but not in the GDP deflator.

Question 18

For an imaginary economy, the value of the consumer price index was 140 in 2013 and 146.5 in 2014. The economy's inflation rate for 2014 was

Accepted Answer

A) 4.6 percent. 
B) 6.5 percent. 
C) 4.4 percent. 
D) 46.5 percent. 
A) 4.6 percent. 
B) 6.5 percent. 
C) 4.4 percent. 
D) 46.5 percent.

Question 19

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

Accepted Answer

A) GDP deflator rises much more than does the consumer price index. 
B) consumer price index rises much more than does the GDP deflator. 
C) GDP deflator and the consumer price index rise by about the same amount. 
D) consumer price index rises slightly more than does the GDP deflator. 
A) GDP deflator rises much more than does the consumer price index. 
B) consumer price index rises much more than does the GDP deflator. 
C) GDP deflator and the consumer price index rise by about the same amount. 
D) consumer price index rises slightly more than does the GDP deflator.

Question 20

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. If 2013 is the base year, then the CPI for 2012 was

Accepted Answer

A) 75.3. 
B) 100.0. 
C) 116.0. 
D) 132.8. 
A) 75.3. 
B) 100.0. 
C) 116.0. 
D) 132.8.

Exam 24: Measuring the Cost of Living

In the basket of goods that is used to compute the consumer price index, the three largest categories of consumer spending are

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 cost of the basket

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?

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 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Of Social Security benefits and federal income tax brackets, which is indexed?

Table 24-10 The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats. -Refer to Table 24-10. If 2009 is the base year, then the consumer price index was

Which of the following is the correct formula for calculating the consumer price index?

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

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

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. If 2013 is the base year, then the CPI for 2013 was

Suppose the CPI was 56 in 1967, and suppose one must spend $349 today to obtain the same basket of goods and services that could be bought for $100 in 1967. Then today's CPI is

For purposes of calculating the CPI, the transportation category of consumer spending includes the cost of

When the relative price of a good increases, consumers respond by buying

For purposes of calculating the CPI, the apparel category of consumer spending includes the cost of

An increase in the price of bread produced domestically will be reflected in

For an imaginary economy, the value of the consumer price index was 140 in 2013 and 146.5 in 2014. The economy's inflation rate for 2014 was

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

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. If 2013 is the base year, then the CPI for 2012 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

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