Question 1

If prices have increased since the base period, then

Accepted Answer

A)  real GDP is smaller than nominal GDP. 
B)  real GDP is larger than nominal GDP. 
C)  real GDP is equal to nominal GDP. 
D)  there is no way to adjust nominal GDP so that it equals real GDP. 
E)  real GDP can no longer be compared to nominal GDP. 
A)  real GDP is smaller than nominal GDP. 
B)  real GDP is larger than nominal GDP. 
C)  real GDP is equal to nominal GDP. 
D)  there is no way to adjust nominal GDP so that it equals real GDP. 
E)  real GDP can no longer be compared to nominal GDP.

Question 2

Which of the following is a bias in the CPI?
i. new goods bias
ii. index change bias
iii. commodity substitution bias

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  i and iii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  i and iii 
E)  i, ii, and iii

Question 3

If the nominal wage is $30 in 2009 and the CPI is 202 in 2009, then the real wage in 1982-1984 dollars

Accepted Answer

A)  cannot be calculated without the past year wage rate. 
B)  is $30. 
C)  is $14.85, 
D)  is $1.48. 
E)  is $29.00. 
A)  cannot be calculated without the past year wage rate. 
B)  is $30. 
C)  is $14.85, 
D)  is $1.48. 
E)  is $29.00.

Question 4

$$\begin{array} { c c c c } 
\text { Item } & \begin{array} { c } 
\text { Quantity } \
( 2009 )
\end{array} & \begin{array} { c } 
\text { Price } \
( 2009 )
\end{array} & \begin{array} { c } 
\text { Price } \
( 2010 )
\end{array} \
\hline \text { Salt } & 2 & \$ 1.00 & \$ 2.00 \
\text { Bread } & 20 & \$ 2.50 & \$ 3.00 \
\hline
\end{array}$$
-The data in the table above shows the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2009.The cost of the CPI market basket in 2010 is

Accepted Answer

A)  $5.00. 
B)  $64.00. 
C)  $8.50. 
D)  $52.00. 
E)  unable to be calculated because information is needed about the quantities purchased in 2008. 
A)  $5.00. 
B)  $64.00. 
C)  $8.50. 
D)  $52.00. 
E)  unable to be calculated because information is needed about the quantities purchased in 2008.

Question 5

$$\begin{array} { c c c c } 
\text { Item } & \begin{array} { c } 
\text { Quantity } \
( 2009 )
\end{array} & \begin{array} { c } 
\text { Price } \
( 2009 )
\end{array} & \begin{array} { c } 
\text { Price } \
( 2010 )
\end{array} \
\hline \text { Salt } & 2 & \$ 1.00 & \$ 2.00 \
\text { Bread } & 20 & \$ 2.50 & \$ 3.00 \
\hline
\end{array}$$
-The data in the table above shows the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2009.The CPI in 2009 is

Accepted Answer

A)  100. 
B)  94.2. 
C)  106.2. 
D)  124. 
E)  140.5. 
A)  100. 
B)  94.2. 
C)  106.2. 
D)  124. 
E)  140.5.

Question 6

In the late 1970s, the inflation rate was over 10 percent per year.Many home mortgage lending institutions had mortgages outstanding that had been made in the 1960s at nominal interest rates of around 5 percent per year.Many of these lending institutions failed; what can explain the high failure rate of lenders in the late 1970s?

Accepted Answer

The real interest rate the lenders were

Question 7

All of the following can create a bias in the CPI EXCEPT the

Accepted Answer

A)  new goods bias. 
B)  outlet substitution bias. 
C)  commodity substitution bias. 
D)  GDP price index bias. 
E)  quality change bias. 
A)  new goods bias. 
B)  outlet substitution bias. 
C)  commodity substitution bias. 
D)  GDP price index bias. 
E)  quality change bias.

Question 8

The quality change bias is most likely to put ________ into the CPI and so ________ the inflation rate.

Accepted Answer

A)  a downward bias; understate 
B)  an upward bias; understate 
C)  an upward bias; overstate 
D)  a downward bias; overstate 
E)  a random bias; randomly overstate or understate 
A)  a downward bias; understate 
B)  an upward bias; understate 
C)  an upward bias; overstate 
D)  a downward bias; overstate 
E)  a random bias; randomly overstate or understate

Question 9

Economists agree that the CPI

Accepted Answer

A)  is a near perfect measure of the cost of living. 
B)  has no relation to the cost of living. 
C)  is a possibly biased measure of the cost of living. 
D)  almost always shows the cost of living rising less rapidly than is the case in reality. 
E)  overstates inflation by about 4.1 percentage points a year. 
A)  is a near perfect measure of the cost of living. 
B)  has no relation to the cost of living. 
C)  is a possibly biased measure of the cost of living. 
D)  almost always shows the cost of living rising less rapidly than is the case in reality. 
E)  overstates inflation by about 4.1 percentage points a year.

Question 10

In the United States between 1979 and 2009, the CPI

Accepted Answer

A)  increased every year except one. 
B)  only decreased during the 1980s and 1990s. 
C)  only increased during 1979 and 1980. 
D)  increased faster during the 1980s and 1990s than during 1979 and 1980. 
E)  increased every year. 
A)  increased every year except one. 
B)  only decreased during the 1980s and 1990s. 
C)  only increased during 1979 and 1980. 
D)  increased faster during the 1980s and 1990s than during 1979 and 1980. 
E)  increased every year.

Question 11

-The table above gives the purchases of an average consumer in a small economy.(These consumers purchase only loaves of bread and jugs of soda.) Suppose 2008 is the reference base period.
a. What quantities are in the CPI market basket?
b. What is the cost of the CPI market basket using 2008 prices?
c. What is the cost of the CPI market basket using 2009 prices?
d. What is the CPI in 2009?

Accepted Answer

a. The quantities in the CPI market bask

Question 12

To measure the CPI, the BLS economic assistants check the prices of

Accepted Answer

A)  all the goods and services produced in a given year. 
B)  some of the consumer goods but none of the services produced in a given year. 
C)  about 80,000 goods and services each month. 
D)  about 80,000 goods and services each quarter. 
E)  only the prices of the goods and services whose prices have changed. 
A)  all the goods and services produced in a given year. 
B)  some of the consumer goods but none of the services produced in a given year. 
C)  about 80,000 goods and services each month. 
D)  about 80,000 goods and services each quarter. 
E)  only the prices of the goods and services whose prices have changed.

Question 13

In 2008, Cameron began his career with SBC.His starting salary was $32,000.By 2010, his salary increased to $35,000.If the CPI was 100.0 in 2008 and 107.5 in 2010, Cameron's 2010 real income is

Accepted Answer

A)  $32,000. 
B)  $32,558. 
C)  $34,400. 
D)  $37,625. 
E)  $35,000. 
A)  $32,000. 
B)  $32,558. 
C)  $34,400. 
D)  $37,625. 
E)  $35,000.

Question 14

-The trends displayed in the table can best be explained by

Accepted Answer

A)  the nominal wage rate has increased at a rate about equal to the inflation rate. 
B)  the real wage rate has increased at a rate about equal to the inflation rate. 
C)  service industries have increased as a proportion of the economy and they tend to have higher nominal wage rates. 
D)  the inflation rate has been rising over the time period. 
E)  None of the above can explain the trends in the figure. 
A)  the nominal wage rate has increased at a rate about equal to the inflation rate. 
B)  the real wage rate has increased at a rate about equal to the inflation rate. 
C)  service industries have increased as a proportion of the economy and they tend to have higher nominal wage rates. 
D)  the inflation rate has been rising over the time period. 
E)  None of the above can explain the trends in the figure.

Question 15

When the nominal price of a good increases over time, must its real price also increase?

Accepted Answer

No, even though the nominal price of a g

Question 16

In 1995, the CPI was 152.5 and the price of an economics textbook was $70.00 and a music CD was $16.00.If the CPI was 172.3 in 2009, what were the prices of the economics textbook and the music CD in 2009 dollars?

Accepted Answer

To adjust the two prices, the ratio of t

Question 17

If we compare the last 30 years of inflation as recorded by the CPI and the PCE price index we find that the

Accepted Answer

A)  two measures fluctuate together. 
B)  CPI inflation rate has consistently been at least 5 percentage points above the PCE price index inflation rate. 
C)  PCE price index inflation rate has consistently been at least 5 percentage points above the CPI inflation rate. 
D)  two measures give very different inflation rates for most years. 
E)  the CPI inflation rate was always positive but the PCE price index inflation rate was frequently negative. 
A)  two measures fluctuate together. 
B)  CPI inflation rate has consistently been at least 5 percentage points above the PCE price index inflation rate. 
C)  PCE price index inflation rate has consistently been at least 5 percentage points above the CPI inflation rate. 
D)  two measures give very different inflation rates for most years. 
E)  the CPI inflation rate was always positive but the PCE price index inflation rate was frequently negative.

Question 18

If the current period has a CPI of 143, then the amount of inflation since the base period is

Accepted Answer

A)  143 percent. 
B)  43 percent. 
C)  57 percent. 
D)  157 percent. 
E)  unknown without knowing the base period's CPI. 
A)  143 percent. 
B)  43 percent. 
C)  57 percent. 
D)  157 percent. 
E)  unknown without knowing the base period's CPI.

Question 19

The real interest rate equals the

Accepted Answer

A)  nominal interest rate multiplied by 100. 
B)  nominal interest rate divided by 100. 
C)  nominal interest rate minus the inflation rate. 
D)  inflation rate minus the nominal interest rate. 
E)  nominal interest rate divided by the inflation rate and then multiplied by 100. 
A)  nominal interest rate multiplied by 100. 
B)  nominal interest rate divided by 100. 
C)  nominal interest rate minus the inflation rate. 
D)  inflation rate minus the nominal interest rate. 
E)  nominal interest rate divided by the inflation rate and then multiplied by 100.

Question 20

In 1970, the CPI was 39 and in 2000 it was 172.A local phone call cost $0.10 in 1970.What is the price of this phone call in 2000 dollars?

Accepted Answer

A)  $1.42 
B)  $0.39 
C)  $1.72 
D)  $0.44 
E)  $0.23 
A)  $1.42 
B)  $0.39 
C)  $1.72 
D)  $0.44 
E)  $0.23

If prices have increased since the base period, then

Which of the following is a bias in the CPI? i. new goods bias ii. index change bias iii. commodity substitution bias

If the nominal wage is $30 in 2009 and the CPI is 202 in 2009, then the real wage in 1982-1984 dollars

Item Quantity (2009) Price (2009) Price (2010) Salt 2 \ 1.00 \ 2.00 Bread 20 \ 2.50 \ 3.00 -The data in the table above shows the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2009.The cost of the CPI market basket in 2010 is

Item Quantity (2009) Price (2009) Price (2010) Salt 2 \ 1.00 \ 2.00 Bread 20 \ 2.50 \ 3.00 -The data in the table above shows the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2009.The CPI in 2009 is

All of the following can create a bias in the CPI EXCEPT the

The quality change bias is most likely to put into the CPI and so the inflation rate.

Economists agree that the CPI

In the United States between 1979 and 2009, the CPI

To measure the CPI, the BLS economic assistants check the prices of

In 2008, Cameron began his career with SBC.His starting salary was $32,000.By 2010, his salary increased to $35,000.If the CPI was 100.0 in 2008 and 107.5 in 2010, Cameron's 2010 real income is

-The trends displayed in the table can best be explained by

When the nominal price of a good increases over time, must its real price also increase?

In 1995, the CPI was 152.5 and the price of an economics textbook was $70.00 and a music CD was $16.00.If the CPI was 172.3 in 2009, what were the prices of the economics textbook and the music CD in 2009 dollars?

If we compare the last 30 years of inflation as recorded by the CPI and the PCE price index we find that the

If the current period has a CPI of 143, then the amount of inflation since the base period is

The real interest rate equals the

In 1970, the CPI was 39 and in 2000 it was 172.A local phone call cost $0.10 in 1970.What is the price of this phone call in 2000 dollars?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 7: The Cpi and the Cost of Living

If prices have increased since the base period, then

Which of the following is a bias in the CPI? i. new goods bias ii. index change bias iii. commodity substitution bias

If the nominal wage is $30 in 2009 and the CPI is 202 in 2009, then the real wage in 1982-1984 dollars

Item Quantity (2009) Price (2009) Price (2010) Salt 2 \ 1.00 \ 2.00 Bread 20 \ 2.50 \ 3.00 -The data in the table above shows the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2009.The cost of the CPI market basket in 2010 is

Item Quantity (2009) Price (2009) Price (2010) Salt 2 \ 1.00 \ 2.00 Bread 20 \ 2.50 \ 3.00 -The data in the table above shows the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2009.The CPI in 2009 is

All of the following can create a bias in the CPI EXCEPT the

The quality change bias is most likely to put ________ into the CPI and so ________ the inflation rate.

Economists agree that the CPI

In the United States between 1979 and 2009, the CPI

To measure the CPI, the BLS economic assistants check the prices of

In 2008, Cameron began his career with SBC.His starting salary was $32,000.By 2010, his salary increased to $35,000.If the CPI was 100.0 in 2008 and 107.5 in 2010, Cameron's 2010 real income is

-The trends displayed in the table can best be explained by

When the nominal price of a good increases over time, must its real price also increase?

In 1995, the CPI was 152.5 and the price of an economics textbook was $70.00 and a music CD was $16.00.If the CPI was 172.3 in 2009, what were the prices of the economics textbook and the music CD in 2009 dollars?

If we compare the last 30 years of inflation as recorded by the CPI and the PCE price index we find that the

If the current period has a CPI of 143, then the amount of inflation since the base period is

The real interest rate equals the

In 1970, the CPI was 39 and in 2000 it was 172.A local phone call cost $0.10 in 1970.What is the price of this phone call in 2000 dollars?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

The quality change bias is most likely to put into the CPI and so the inflation rate.