Exam 24: Measuring the Cost of Living

In 1949 Sycamore,Illinois built a hospital for about $500,000.In 1987 the county restored the courthouse for about $2.4 million.A price index for nonresidential construction was 14 in 1949,92 in 1987,and 114.5 in 2000.According to these numbers the hospital cost about

In computing the consumer price index,a base year is chosen.Which of the following statements about the base year is correct?

The inflation rate is defined as the

Although they sometimes diverge,generally the CPI and the GDP deflator move in the same direction.

The GDP deflator reflects the

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

In the country of Shem, the CPI is calculated using a market basket consisting of 5 apples, 4 loaves of bread, 3 robes and 2 gallons of gasoline. The per-unit prices of these goods have been as follows: Table 24-3 -Refer to Table 24-3.Using 2002 as the base year,what was the inflation rate between 2003 and 2004?

Which is likely to have the larger effect on the CPI,a 2 percent increase in food or a 3 percent increase in diamond rings? Explain.

An increase in the price of domestically-produced industrial robots will be reflected in

When the quality of a good improves,the purchasing power of the dollar

An important difference between the GDP deflator and the consumer price index is that

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

Laura bought word-processing software in 2005 for $50.Laura's twin brother,Laurence,buys an upgrade of the same software in 2006 for $50.What problem in the construction of the CPI does this situation best represent?

In the CPI,goods and services are weighted according to

The government's use of a statistical technique called hedonics

In general,if a consumer good is produced domestically and consumed domestically,a decrease in its price will have which of the following effects?

By not taking into account the possibility of consumer substitution,the CPI

The price index in the first year is 150;in the second year it is 160;and in the third year it is 175.The inflation rate is about

In calculating the consumer price index,a fixed basket of goods is used.The quantities of the goods in the fixed basket are determined by

Suppose the price index in 2004 was 100;the price index in 2005 was 118;and the inflation rate between 2005 and 2006 was lower than it was between 2004 and 2005.This means that