Question 1

The Bureau of Labor Statistics determines which prices are most important to the typical consumer by surveying consumers.

Accepted Answer

A) True 
 B)False

Question 2

The CPI does not reflect the increase in the value of the dollar that arises from the introduction of new goods.

Accepted Answer

A) True 
 B)False

Question 3

Categories of U.S. consumer spending, ranked from largest to smallest, are

Accepted Answer

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

Question 4

In the U.S., when the price of oil rises, the CPI rises by much more than does the GDP deflator.

Accepted Answer

A) True 
 B)False

Question 5

If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?

Accepted Answer

The real i

Question 6

The inflation rate is the absolute change in the price level from the previous period.

Accepted Answer

A) True 
 B)False

Question 7

In the United States, real interest rates were

Accepted Answer

A) high in the 1970s and 1990s. 
B) low in the 1970s and 1990s. 
C) high in the 1970s and low in the 1990s. 
D) low in the 1970s and high in the 1990s. 
A) high in the 1970s and 1990s. 
B) low in the 1970s and 1990s. 
C) high in the 1970s and low in the 1990s. 
D) low in the 1970s and high in the 1990s.

Question 8

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 $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was

Accepted Answer

A) 109.8 and the inflation rate was 9.8%. 
B) 109.8 and the inflation rate was 16.9%. 
C) 116.9 and the inflation rate was 9.8%. 
D) 116.9 and the inflation rate was 16.9%. 
A) 109.8 and the inflation rate was 9.8%. 
B) 109.8 and the inflation rate was 16.9%. 
C) 116.9 and the inflation rate was 9.8%. 
D) 116.9 and the inflation rate was 16.9%.

Question 9

Suppose that the prices of dairy products have risen relatively less than prices in general over the last several years. To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

A) substitution bias 
B) introduction of new goods 
C) unmeasured quality change 
D) income bias 
A) substitution bias 
B) introduction of new goods 
C) unmeasured quality change 
D) income bias

Question 10

The three problems with using the consumer price index as a measure of the cost of living are

Accepted Answer

A) widely acknowledged and easy to solve. 
B) widely acknowledged and difficult to solve. 
C) nearly unacknowledged and easy to solve. 
D) nearly unacknowledged and difficult to solve. 
A) widely acknowledged and easy to solve. 
B) widely acknowledged and difficult to solve. 
C) nearly unacknowledged and easy to solve. 
D) nearly unacknowledged and difficult to solve.

Question 11

The price index was 220 in one year and 238.2 in the next year. What was the inflation rate?

Accepted Answer

A) 8.3 percent 
B) 108.3 percent 
C) 4.8 percent 
D) 38.2 percent 
A) 8.3 percent 
B) 108.3 percent 
C) 4.8 percent 
D) 38.2 percent

Question 12

John just graduated law school and has two competing job offers. The first is in Phoenix and pays a salary of $150,000. He has a similar job offer in Cleveland that pays $90,000. Which pair of CPIs would make the two salaries have the same purchasing power?

Accepted Answer

A) 70 in Phoenix and 42 in Cleveland 
B) 68 in Phoenix and 34 in Cleveland 
C) 42 in Phoenix and 70 in Cleveland 
D) 34 in Phoenix and 68 in Cleveland 
A) 70 in Phoenix and 42 in Cleveland 
B) 68 in Phoenix and 34 in Cleveland 
C) 42 in Phoenix and 70 in Cleveland 
D) 34 in Phoenix and 68 in Cleveland

Question 13

Suppose that the CPI in 1990 was 150, that the inflation rate in 1991 was 6%, and that the inflation rate in 1992 was 4%. What was the CPI in 1991 and 1992?

Accepted Answer

The CPI in 1991 was

Question 14

The CPI assumes a fixed basket of goods over time. In fact, consumers are likely to change purchasing behavior over time by purchasing less of the goods whose prices have risen by relatively large amounts and by buying more of the goods whose prices have risen less or maybe even fallen. What problem does this cause for measuring the cost of living?

Accepted Answer

This creates a subst

Question 15

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 2012 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.

Question 16

Archie has a savings account at a bank. If he earns 6 percent interest on his account and if there is deflation, then his purchasing power rises by more than 6 percent over the course of a year.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is correct?

Accepted Answer

A) The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers. 
B) The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers. 
C) The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers. 
D) The GDP deflator is more commonly used as a gauge of inflation than the CPI is. 
A) The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers. 
B) The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers. 
C) The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers. 
D) The GDP deflator is more commonly used as a gauge of inflation than the CPI is.

Question 18

Consumer spending in what category is the largest component of the CPI?

Accepted Answer

The answer of Consumer spending in what category is the...

Question 19

Scenario 24-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost

Accepted Answer

A) $0.55, so golf balls were cheaper in 1975. 
B) $0.55, so golf balls were cheaper in 2005. 
C) $7.32, so golf balls were cheaper in 1975. 
D) $7.32, so golf balls were cheaper in 2005. 
A) $0.55, so golf balls were cheaper in 1975. 
B) $0.55, so golf balls were cheaper in 2005. 
C) $7.32, so golf balls were cheaper in 1975. 
D) $7.32, so golf balls were cheaper in 2005.

Question 20

Table 24-13. Olivia's expenditures on clothing for three consecutive years, along with some values for the CPI, are presented in the table below.  
-Refer to Table 24-13. To the nearest dollar, how much is Olivia's 2010 clothing expenditure in 2011 dollars?

Accepted Answer

A) $1,683 
B) $1,778 
C) $1,800 
D) $3,600 
A) $1,683 
B) $1,778 
C) $1,800 
D) $3,600

Exam 24: Measuring the Cost of Living

The Bureau of Labor Statistics determines which prices are most important to the typical consumer by surveying consumers.

The CPI does not reflect the increase in the value of the dollar that arises from the introduction of new goods.

Categories of U.S. consumer spending, ranked from largest to smallest, are

In the U.S., when the price of oil rises, the CPI rises by much more than does the GDP deflator.

If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?

The inflation rate is the absolute change in the price level from the previous period.

In the United States, real interest rates were

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 $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was

Suppose that the prices of dairy products have risen relatively less than prices in general over the last several years. To which problem in the construction of the CPI is this situation most relevant?

The three problems with using the consumer price index as a measure of the cost of living are

The price index was 220 in one year and 238.2 in the next year. What was the inflation rate?

John just graduated law school and has two competing job offers. The first is in Phoenix and pays a salary of $150,000. He has a similar job offer in Cleveland that pays $90,000. Which pair of CPIs would make the two salaries have the same purchasing power?

Suppose that the CPI in 1990 was 150, that the inflation rate in 1991 was 6%, and that the inflation rate in 1992 was 4%. What was the CPI in 1991 and 1992?

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 2012 is the base year, then the CPI for 2012 was

Archie has a savings account at a bank. If he earns 6 percent interest on his account and if there is deflation, then his purchasing power rises by more than 6 percent over the course of a year.

Which of the following is correct?

Consumer spending in what category is the largest component of the CPI?

Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost

Table 24-13. Olivia's expenditures on clothing for three consecutive years, along with some values for the CPI, are presented in the table below. -Refer to Table 24-13. To the nearest dollar, how much is Olivia's 2010 clothing expenditure in 2011 dollars?

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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