Question 1

When the price of Italian wine rises, this change is reflected in the U.S. CPI but not in the U.S. GDP deflator.

Accepted Answer

A) True 
 B)False

Question 2

Table 24-1
The following table pertains to Quicheland, an economy in which the typical consumer's basket consists of 15 bushels of apples and 7 bushels of almond .
​
​
 $$\begin{array} { | l | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Price of Apples } \
\text { (Dollarsp er bushel) }
\end{array} & \begin{array} { c } 
\text { Price of Almond } \
\text { (Dollars per bushel) }
\end{array} \
\hline \text { Year 1 } & 12 & 4 \
\hline \text { Year } 2 & 7 & 11 \
\hline
\end{array}$$ ​
-Refer to Table 24-1. The cost of the basket in Year 1 was

Accepted Answer

A) $257. 
B) $208. 
C) $109. 
D) $28. 
A) $257. 
B) $208. 
C) $109. 
D) $28.

Question 3

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 4

Suppose the consumer price index was 184 in Year 1 and 198.17 in Year 1. The nominal interest rate during this period was steady at 5.8 percent. What was the real interest rate during this period?

Accepted Answer

A) 0.4 percent 
B) 1.2 percent 
C) -1.9 percent 
D) -2.6 percent 
A) 0.4 percent 
B) 1.2 percent 
C) -1.9 percent 
D) -2.6 percent

Question 5

Why does the GDP deflator give a different rate of inflation than the CPI?

Accepted Answer

The GDP deflator and the CPI differ in t

Question 6

For any given year, the CPI is the price of the basket of goods and services in the

Accepted Answer

A) given year divided by the price of the basket in the base year, then multiplied by 100. 
B) given year divided by the price of the basket in the previous year, then multiplied by 100. 
C) base year divided by the price of the basket in the given year, then multiplied by 100. 
D) previous year divided by the price of the basket in the given year, then multiplied by 100. 
A) given year divided by the price of the basket in the base year, then multiplied by 100. 
B) given year divided by the price of the basket in the previous year, then multiplied by 100. 
C) base year divided by the price of the basket in the given year, then multiplied by 100. 
D) previous year divided by the price of the basket in the given year, then multiplied by 100.

Question 7

Write the formula for finding the rate of inflation in 2011 if you have only the CPI for the years 2010, 2011, and 2012.

Accepted Answer

[ (CPI in 2011 - CPI

Question 8

It is possible to observe a positive nominal interest rate together with a negative real interest rate.

Accepted Answer

A) True 
 B)False

Question 9

Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.

Accepted Answer

A) True 
 B)False

Question 10

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Accepted Answer

A) True 
 B)False

Question 11

Scenario 24-3
A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year.
  
-Refer to Scenario 24-3. Using 2011 as the base year, what is the inflation rate in 2011?

Accepted Answer

The inflat

Question 12

Social Security payments are indexed for inflation using

Accepted Answer

A) the CPI. 
B) the PPI. 
C) the GDP deflator. 
D) real interest rates. 
A) the CPI. 
B) the PPI. 
C) the GDP deflator. 
D) real interest rates.

Question 13

In the late 1970s, U.S. nominal interest rates were high and real interest rates were low, but in the late 1990s, U.S. nominal interest rates were low and real interest rates were high.

Accepted Answer

A) True 
 B)False

Question 14

The CPI is a measure of the overall cost of the goods and services bought by

Accepted Answer

A) a typical consumer, and the CPI is computed and reported by the Department of the Treasury. 
B) typical consumers and typical business firms, and the CPI is computed and reported by the Department of the Treasury. 
C) a typical consumer, and the CPI is computed and reported by the Bureau of Labor Statistics. 
D) typical consumers and typical business firms, and the CPI is computed and reported by the Bureau of Labor Statistics. 
A) a typical consumer, and the CPI is computed and reported by the Department of the Treasury. 
B) typical consumers and typical business firms, and the CPI is computed and reported by the Department of the Treasury. 
C) a typical consumer, and the CPI is computed and reported by the Bureau of Labor Statistics. 
D) typical consumers and typical business firms, and the CPI is computed and reported by the Bureau of Labor Statistics.

Exam 24: Measuring the Cost of Living

When the price of Italian wine rises, this change is reflected in the U.S. CPI but not in the U.S. GDP deflator.

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?

Suppose the consumer price index was 184 in Year 1 and 198.17 in Year 1. The nominal interest rate during this period was steady at 5.8 percent. What was the real interest rate during this period?

Why does the GDP deflator give a different rate of inflation than the CPI?

For any given year, the CPI is the price of the basket of goods and services in the

Write the formula for finding the rate of inflation in 2011 if you have only the CPI for the years 2010, 2011, and 2012.

It is possible to observe a positive nominal interest rate together with a negative real interest rate.

Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Scenario 24-3 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-3. Using 2011 as the base year, what is the inflation rate in 2011?

Social Security payments are indexed for inflation using

In the late 1970s, U.S. nominal interest rates were high and real interest rates were low, but in the late 1990s, U.S. nominal interest rates were low and real interest rates were high.

The CPI is a measure of the overall cost of the goods and services bought by

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 Nations 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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