Question 1

The period for which the Consumer Price Index is defined to equal 100 is called the

Accepted Answer

A)  reference base period. 
B)  base period. 
C)  starting point. 
D)  zero period. 
E)  beginning period. 
A)  reference base period. 
B)  base period. 
C)  starting point. 
D)  zero period. 
E)  beginning period.

Question 2

During 1990, a Hershey candy bar cost $.85.By 2007, the same Hershey candy bar cost $1.25.If the CPI was 130.7 in 1990 and 180.5 in 2007, the price of the 1990 Hershey candy bar in 2007 prices is

Accepted Answer

A)  greater than the price of the 2007 Hershey candy bar. 
B)  less than the price of the 2007 Hershey candy bar. 
C)  equivalent to the price of the 2007 Hershey candy bar. 
D)  perhaps greater than, perhaps less, or perhaps the same depending on whether the CPI in 2007 has been adjusted to reflect 2007 prices. 
E)  not able to be determined given the information in the question. 
A)  greater than the price of the 2007 Hershey candy bar. 
B)  less than the price of the 2007 Hershey candy bar. 
C)  equivalent to the price of the 2007 Hershey candy bar. 
D)  perhaps greater than, perhaps less, or perhaps the same depending on whether the CPI in 2007 has been adjusted to reflect 2007 prices. 
E)  not able to be determined given the information in the question.

Question 3

If a private wage contract is agreed upon with a cost of living adjustment such that wage hikes are equal to increases in the CPI,

Accepted Answer

A)  the employer benefits because wages will rise less than the change in actual prices. 
B)  workers exactly keep pace with changes in the cost of living. 
C)  workers benefit because the CPI increases more rapidly than does the cost of living. 
D)  the CPI bias means that workers benefit if the price level rises and the employer benefits if the price level falls. 
E)  the CPI bias means that workers benefit if the price level falls and the employer benefits if the price level rises. 
A)  the employer benefits because wages will rise less than the change in actual prices. 
B)  workers exactly keep pace with changes in the cost of living. 
C)  workers benefit because the CPI increases more rapidly than does the cost of living. 
D)  the CPI bias means that workers benefit if the price level rises and the employer benefits if the price level falls. 
E)  the CPI bias means that workers benefit if the price level falls and the employer benefits if the price level rises.

Question 4

The CPI is biased because it

Accepted Answer

A)  takes into account the changes in product quality. 
B)  takes into account the changes in technology. 
C)  does not always take into account the changes in product quality. 
D)  accurately measures the cost of living but not the cost of producing. 
E)  does not include services. 
A)  takes into account the changes in product quality. 
B)  takes into account the changes in technology. 
C)  does not always take into account the changes in product quality. 
D)  accurately measures the cost of living but not the cost of producing. 
E)  does not include services.

Question 5

-The table above gives the purchases of a typical consumer in a country comprised of one large city.These consumers purchase only restaurant meals and parking.The year 2008 is the reference base period.
a. Find the total cost of the CPI market basket for 2008 and 2009.
b. What is the CPI in 2008 and in 2009?
c. What is the inflation rate between 2008 and 2009?

Accepted Answer

a. The total cost of the CPI market bask

Question 6

The price of dishwashers has remained relatively constant while the quality of dishwashers has improved.The CPI

Accepted Answer

A)  is adjusted monthly to reflect the improvement in quality. 
B)  is increased monthly to reflect the increased quality of dishwashers. 
C)  has an upward bias if it is not adjusted to take account of the higher quality. 
D)  has an upward bias because it does not reflect the increased production of dishwashers. 
E)  should not take account of any quality changes because it is a price index not a quality index. 
A)  is adjusted monthly to reflect the improvement in quality. 
B)  is increased monthly to reflect the increased quality of dishwashers. 
C)  has an upward bias if it is not adjusted to take account of the higher quality. 
D)  has an upward bias because it does not reflect the increased production of dishwashers. 
E)  should not take account of any quality changes because it is a price index not a quality index.

Question 7

The GDP deflator is a measure of

Accepted Answer

A)  taxes and subsidies. 
B)  changes in quantities. 
C)  prices. 
D)  depreciation. 
E)  changes in nominal GDP. 
A)  taxes and subsidies. 
B)  changes in quantities. 
C)  prices. 
D)  depreciation. 
E)  changes in nominal GDP.

Question 8

Which of the following is true?

Accepted Answer

A)  The real interest rate is always positive. 
B)  The nominal interest rate is usually negative. 
C)  The real interest rate can be negative. 
D)  The real interest rate can never be zero. 
E)  The nominal interest rate is usually less than the real interest rate. 
A)  The real interest rate is always positive. 
B)  The nominal interest rate is usually negative. 
C)  The real interest rate can be negative. 
D)  The real interest rate can never be zero. 
E)  The nominal interest rate is usually less than the real interest rate.

Question 9

The real interest rate equals the

Accepted Answer

A)  nominal interest rate - inflation rate. 
B)  nominal interest rate + inflation rate. 
C)  (nominal interest rate ÷ inflation rate). 
D)  inflation rate - nominal interest rate. 
E)  (nominal interest rate + inflation rate) × 100. 
A)  nominal interest rate - inflation rate. 
B)  nominal interest rate + inflation rate. 
C)  (nominal interest rate ÷ inflation rate). 
D)  inflation rate - nominal interest rate. 
E)  (nominal interest rate + inflation rate) × 100.

Question 10

To compare the real price of gas in 1975 to the real price in 2008, we need to know

Accepted Answer

A)  just the two nominal prices in both years. 
B)  the two prices in both years and the inflation rate in 2008. 
C)  the two prices in both years and the CPI in both years. 
D)  the two prices in both years and the two interest rates in both years. 
E)  the two prices in both years and the two inflation rates in both years. 
A)  just the two nominal prices in both years. 
B)  the two prices in both years and the inflation rate in 2008. 
C)  the two prices in both years and the CPI in both years. 
D)  the two prices in both years and the two interest rates in both years. 
E)  the two prices in both years and the two inflation rates in both years.

Question 11

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

Accepted Answer

A)  about 8,000 goods and services every year. 
B)  about 8,000 goods and services every month. 
C)  about 80,000 goods and services every month. 
D)  about 80,000 goods and services every year. 
E)  only the goods and services whose prices have changed every month. 
A)  about 8,000 goods and services every year. 
B)  about 8,000 goods and services every month. 
C)  about 80,000 goods and services every month. 
D)  about 80,000 goods and services every year. 
E)  only the goods and services whose prices have changed every month.

Question 12

If the prices of the goods and services contained in the CPI market basket increase from the base period to the next year, we know that

Accepted Answer

A)  the inflation rate is falling. 
B)  the next year's CPI will be above 100. 
C)  the next year's CPI will be below 100. 
D)  the cost of the CPI market basket at next year's prices is lower than the cost of the CPI market basket at base period prices. 
E)  the market basket used by the BLS must be changed next year to reflect consumers' new expenditures. 
A)  the inflation rate is falling. 
B)  the next year's CPI will be above 100. 
C)  the next year's CPI will be below 100. 
D)  the cost of the CPI market basket at next year's prices is lower than the cost of the CPI market basket at base period prices. 
E)  the market basket used by the BLS must be changed next year to reflect consumers' new expenditures.

Question 13

If the CPI is used as a cost of living index, incomes that are adjusted to reflect the changes in the CPI will

Accepted Answer

A)  increase by more than the actual change in the cost of living. 
B)  decrease by more than the actual change in the cost of living. 
C)  increase by more than the actual change in quantities. 
D)  decrease by more than the actual change in quantities. 
E)  generally rise by about 2 percent a year because the standard of living generally rises by about 2 percent a year. 
A)  increase by more than the actual change in the cost of living. 
B)  decrease by more than the actual change in the cost of living. 
C)  increase by more than the actual change in quantities. 
D)  decrease by more than the actual change in quantities. 
E)  generally rise by about 2 percent a year because the standard of living generally rises by about 2 percent a year.

Question 14

In 1979, the price of gasoline was $1.389 per gallon and the CPI was 72.6.In 2003, the price of gasoline was $1.589 per gallon and the CPI was 182.9.Find the real price of gasoline in 1979 and 2003 in terms of base period dollars.

Accepted Answer

To adjust the price in 1979, the ratio o

Question 15

Explain how the real interest rate could be negative and how this situation would benefit the borrower.

Accepted Answer

When people borrow money, they pay a nom

Question 16

Suppose the base reference period is 1982-1984.If your nominal wage rate is $8.00 per hour when the CPI is 180, what is your real wage rate in 1982-1984 dollars?

Accepted Answer

The real wage rate equals 100

Question 17

Suppose the CPI in 1983 is 100 and the CPI this year is 172.These values for the CPI mean that

Accepted Answer

A)  inflation between the two years was 172 percent. 
B)  typically, a good whose price was $100 in 1983 had a price of $172 this year. 
C)  typically, a good whose price was $172 in 1983 had a price of $100 this year. 
D)  typically, a good whose price was $100 in 1983 had a price of $139 this year. 
E)  typically, a good whose price was $100 in 1983 had a price of $58 this year. 
A)  inflation between the two years was 172 percent. 
B)  typically, a good whose price was $100 in 1983 had a price of $172 this year. 
C)  typically, a good whose price was $172 in 1983 had a price of $100 this year. 
D)  typically, a good whose price was $100 in 1983 had a price of $139 this year. 
E)  typically, a good whose price was $100 in 1983 had a price of $58 this year.

Question 18

The CPI overstates inflation because the average consumer buys

Accepted Answer

A)  the same basket of goods every week. 
B)  more of those goods whose relative price has risen. 
C)  less of those goods whose relative price has risen. 
D)  lower quality goods if they have a choice. 
E)  a generally random assortment of goods and services each week because what is purchased depends on what the consumer needs. 
A)  the same basket of goods every week. 
B)  more of those goods whose relative price has risen. 
C)  less of those goods whose relative price has risen. 
D)  lower quality goods if they have a choice. 
E)  a generally random assortment of goods and services each week because what is purchased depends on what the consumer needs.

Question 19

The formula for the CPI is 100 multiplied by

Accepted Answer

A)  (Cost of CPI market basket at base period prices ÷ Cost of CPI market basket at current period prices). 
B)  (Cost of CPI market basket at current period prices - Cost of CPI market basket at base period prices). 
C)  (Cost of CPI market basket at base period prices - Cost of CPI market basket at current period prices). 
D)  (Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base period prices). 
E)  (Cost of CPI market basket at current period prices + Cost of CPI market basket at base period prices). 
A)  (Cost of CPI market basket at base period prices ÷ Cost of CPI market basket at current period prices). 
B)  (Cost of CPI market basket at current period prices - Cost of CPI market basket at base period prices). 
C)  (Cost of CPI market basket at base period prices - Cost of CPI market basket at current period prices). 
D)  (Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base period prices). 
E)  (Cost of CPI market basket at current period prices + Cost of CPI market basket at base period prices).

Question 20

What is inflation and how is it measured using the Consumer Price Index?

Accepted Answer

The inflation rate is the percentage cha

The period for which the Consumer Price Index is defined to equal 100 is called the

During 1990, a Hershey candy bar cost $.85.By 2007, the same Hershey candy bar cost $1.25.If the CPI was 130.7 in 1990 and 180.5 in 2007, the price of the 1990 Hershey candy bar in 2007 prices is

If a private wage contract is agreed upon with a cost of living adjustment such that wage hikes are equal to increases in the CPI,

The CPI is biased because it

The price of dishwashers has remained relatively constant while the quality of dishwashers has improved.The CPI

The GDP deflator is a measure of

Which of the following is true?

The real interest rate equals the

To compare the real price of gas in 1975 to the real price in 2008, we need to know

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

If the prices of the goods and services contained in the CPI market basket increase from the base period to the next year, we know that

If the CPI is used as a cost of living index, incomes that are adjusted to reflect the changes in the CPI will

In 1979, the price of gasoline was $1.389 per gallon and the CPI was 72.6.In 2003, the price of gasoline was $1.589 per gallon and the CPI was 182.9.Find the real price of gasoline in 1979 and 2003 in terms of base period dollars.

Explain how the real interest rate could be negative and how this situation would benefit the borrower.

Suppose the base reference period is 1982-1984.If your nominal wage rate is $8.00 per hour when the CPI is 180, what is your real wage rate in 1982-1984 dollars?

Suppose the CPI in 1983 is 100 and the CPI this year is 172.These values for the CPI mean that

The CPI overstates inflation because the average consumer buys

The formula for the CPI is 100 multiplied by

What is inflation and how is it measured using the Consumer Price Index?

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

The period for which the Consumer Price Index is defined to equal 100 is called the

During 1990, a Hershey candy bar cost $.85.By 2007, the same Hershey candy bar cost $1.25.If the CPI was 130.7 in 1990 and 180.5 in 2007, the price of the 1990 Hershey candy bar in 2007 prices is

If a private wage contract is agreed upon with a cost of living adjustment such that wage hikes are equal to increases in the CPI,

The CPI is biased because it

The price of dishwashers has remained relatively constant while the quality of dishwashers has improved.The CPI

The GDP deflator is a measure of

Which of the following is true?

The real interest rate equals the

To compare the real price of gas in 1975 to the real price in 2008, we need to know

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

If the prices of the goods and services contained in the CPI market basket increase from the base period to the next year, we know that

If the CPI is used as a cost of living index, incomes that are adjusted to reflect the changes in the CPI will

In 1979, the price of gasoline was $1.389 per gallon and the CPI was 72.6.In 2003, the price of gasoline was $1.589 per gallon and the CPI was 182.9.Find the real price of gasoline in 1979 and 2003 in terms of base period dollars.

Explain how the real interest rate could be negative and how this situation would benefit the borrower.

Suppose the base reference period is 1982-1984.If your nominal wage rate is $8.00 per hour when the CPI is 180, what is your real wage rate in 1982-1984 dollars?

Suppose the CPI in 1983 is 100 and the CPI this year is 172.These values for the CPI mean that

The CPI overstates inflation because the average consumer buys

The formula for the CPI is 100 multiplied by

What is inflation and how is it measured using the Consumer Price Index?

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