Question 1

The second largest category, by relative importance, in the CPI calculation is

Accepted Answer

A) housing. 
B) apparel. 
C) transportation. 
D) medical care. 
A) housing. 
B) apparel. 
C) transportation. 
D) medical care.

Question 2

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was 4 percent. It follows that

Accepted Answer

A) the dollar value of savings increased at 6 percent, and the purchasing power of savings increased at 2 percent. 
B) the dollar value of savings increased at 6 percent, and the purchasing power of savings increased at 10 percent. 
C) the dollar value of savings increased at 10 percent, and the purchasing power of savings increased at 2 percent. 
D) the dollar value of savings increased at 10 percent, and the purchasing power of savings increased at 6 percent. 
A) the dollar value of savings increased at 6 percent, and the purchasing power of savings increased at 2 percent. 
B) the dollar value of savings increased at 6 percent, and the purchasing power of savings increased at 10 percent. 
C) the dollar value of savings increased at 10 percent, and the purchasing power of savings increased at 2 percent. 
D) the dollar value of savings increased at 10 percent, and the purchasing power of savings increased at 6 percent.

Question 3

If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be

Accepted Answer

A) 2012. 
B) 2013. 
C) 2014. 
D) The base year cannot be determined from the given information. 
A) 2012. 
B) 2013. 
C) 2014. 
D) The base year cannot be determined from the given information.

Question 4

Scenario 24-5
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-5. Using 2009 as the base year, what is the inflation rate in 2010?

Accepted Answer

In 2010 th

Question 5

Nate collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then his Social Security payments for 1986 should have been

Accepted Answer

A) $228. 
B) $238. 
C) $257. 
D) $264. 
A) $228. 
B) $238. 
C) $257. 
D) $264.

Question 6

Persistent increases in the overall level of prices have been the norm.

Accepted Answer

A) True 
 B)False

Question 7

The GDP deflator reflects the prices of all goods and services produced around the world, whereas the consumer price index reflects the prices of all goods and services bought by consumers.

Accepted Answer

A) True 
 B)False

Question 8

Which entity within the U.S. government is responsible for computing and reporting the CPI?

Accepted Answer

A) the Department of Commerce 
B) the Department of Labor 
C) the General Accounting Office 
D) the Council of Economic Advisers 
A) the Department of Commerce 
B) the Department of Labor 
C) the General Accounting Office 
D) the Council of Economic Advisers

Question 9

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. Sue Holloway's 1944 income in 2013 dollars is

Accepted Answer

A) $23,033. 
B) $136,909. 
C) $148,909. 
D) $240,960. 
A) $23,033. 
B) $136,909. 
C) $148,909. 
D) $240,960.

Question 10

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.  
-Refer to Table 24-7. If the base year is 2009, then the economy's inflation rate in 2010 is

Accepted Answer

A) 8 percent. 
B) 10 percent. 
C) 10.91 percent. 
D) 11.11 percent. 
A) 8 percent. 
B) 10 percent. 
C) 10.91 percent. 
D) 11.11 percent.

Question 11

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 2013 was

Accepted Answer

A) 100.0. 
B) 116.0. 
C) 132.8. 
D) 154.0. 
A) 100.0. 
B) 116.0. 
C) 132.8. 
D) 154.0.

Question 12

If the nominal interest rates rises, then the inflation rate must have increased.

Accepted Answer

A) True 
 B)False

Question 13

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 CPI for 2012 was

Accepted Answer

A) 95.7. 
B) 100.0. 
C) 90.0. 
D) 110.0. 
A) 95.7. 
B) 100.0. 
C) 90.0. 
D) 110.0.

Question 14

The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.

Accepted Answer

A) True 
 B)False

Question 15

Marion collected Social Security payments of $250 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then her Social Security payments for 1986 should have been

Accepted Answer

A) $268. 
B) $292. 
C) $300. 
D) $358. 
A) $268. 
B) $292. 
C) $300. 
D) $358.

Question 16

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates. From this you conclude

Accepted Answer

A) there were serious episodes of deflation in the time frame represented on the graph. 
B) consumer prices were always rising in the time frame represented on the graph. 
C) the economy never experienced a recession in the time frame represented on the graph. 
D) GDP was always increasing for the time frame represented on the graph. 
A) there were serious episodes of deflation in the time frame represented on the graph. 
B) consumer prices were always rising in the time frame represented on the graph. 
C) the economy never experienced a recession in the time frame represented on the graph. 
D) GDP was always increasing for the time frame represented on the graph.

Question 17

Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 was

Accepted Answer

A) 97.14. 
B) 100.10. 
C) 102.94. 
D) 109.38. 
A) 97.14. 
B) 100.10. 
C) 102.94. 
D) 109.38.

Question 18

Rosa deposits $100 in a bank account that pays an annual interest rate of 20 percent. A year later, after Rosa has accumulated $20 in interest, she withdraws her $120. Rosa's purchasing power

Accepted Answer

A) did not change if the inflation rate was 20 percent. 
B) decreased if the inflation rate was -5 percent. 
C) increased if the inflation rate was 22 percent. 
D) More than one of the above is correct. 
A) did not change if the inflation rate was 20 percent. 
B) decreased if the inflation rate was -5 percent. 
C) increased if the inflation rate was 22 percent. 
D) More than one of the above is correct.

Question 19

If the CPI was 120 in 1994, was 126 in 1995, and was 134.82 in 1996, what was the inflation rate in 1995 and in 1996?

Accepted Answer

The inflation rate i

Question 20

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.

Accepted Answer

A) True 
 B)False

Exam 24: Measuring the Cost of Living

The second largest category, by relative importance, in the CPI calculation is

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was 4 percent. It follows that

If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be

Nate collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then his Social Security payments for 1986 should have been

Persistent increases in the overall level of prices have been the norm.

The GDP deflator reflects the prices of all goods and services produced around the world, whereas the consumer price index reflects the prices of all goods and services bought by consumers.

Which entity within the U.S. government is responsible for computing and reporting the CPI?

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. Sue Holloway's 1944 income in 2013 dollars is

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 24-7. If the base year is 2009, then the economy's inflation rate in 2010 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. If 2012 is the base year, then the CPI for 2013 was

If the nominal interest rates rises, then the inflation rate must have increased.

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 CPI for 2012 was

The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.

Marion collected Social Security payments of $250 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then her Social Security payments for 1986 should have been

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates. From this you conclude

Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 was

Rosa deposits $100 in a bank account that pays an annual interest rate of 20 percent. A year later, after Rosa has accumulated $20 in interest, she withdraws her $120. Rosa's purchasing power

If the CPI was 120 in 1994, was 126 in 1995, and was 134.82 in 1996, what was the inflation rate in 1995 and in 1996?

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.

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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