Question 1

If the bank returns $1,060 on the $1,000 deposited for a year during which inflation was 4 percent, the real interest rate is

Accepted Answer

A)  6 percent. 
B)  10 percent. 
C)  -2 percent. 
D)  2 percent. 
E)  16 percent. 
A)  6 percent. 
B)  10 percent. 
C)  -2 percent. 
D)  2 percent. 
E)  16 percent.

Question 2

In the United States between 1984 and 2009, the

Accepted Answer

A)  nominal wage rate increased more than the real wage rate. 
B)  real wage rate increased more than the nominal wage rate. 
C)  nominal and real wage rates increased the same amount. 
D)  real and the nominal wage rates decreased the same amount. 
E)  nominal wage rate decreased and the real wage rate increased. 
A)  nominal wage rate increased more than the real wage rate. 
B)  real wage rate increased more than the nominal wage rate. 
C)  nominal and real wage rates increased the same amount. 
D)  real and the nominal wage rates decreased the same amount. 
E)  nominal wage rate decreased and the real wage rate increased.

Question 3

An example of the new goods bias in the calculation of the CPI is a price increase in

Accepted Answer

A)  butter relative to margarine. 
B)  an iPod player relative to a Walkman. 
C)  a 2011 Honda Civic Si Coupe relative to a 2011 Honda Civic Si Sedan. 
D)  textbooks bought through the campus bookstore relative to textbooks bought through Amazon.com. 
E)  a Caribbean cruise for a couple who has never been on a cruise before. 
A)  butter relative to margarine. 
B)  an iPod player relative to a Walkman. 
C)  a 2011 Honda Civic Si Coupe relative to a 2011 Honda Civic Si Sedan. 
D)  textbooks bought through the campus bookstore relative to textbooks bought through Amazon.com. 
E)  a Caribbean cruise for a couple who has never been on a cruise before.

Question 4

When firms decide how much labor to hire, one of the factors that influences them is the

Accepted Answer

A)  nominal wage rate plus the inflation rate. 
B)  nominal wage rate divided by the price level and then multiplied by 100. 
C)  nominal wage rate minus the inflation rate. 
D)  real wage rate plus the inflation rate. 
E)  nominal wage rate divided by the inflation rate and then multiplied by 100. 
A)  nominal wage rate plus the inflation rate. 
B)  nominal wage rate divided by the price level and then multiplied by 100. 
C)  nominal wage rate minus the inflation rate. 
D)  real wage rate plus the inflation rate. 
E)  nominal wage rate divided by the inflation rate and then multiplied by 100.

Question 5

In the current year, the CPI is 160 and during the previous year the CPI was 181.The inflation rate between these years is

Accepted Answer

A)  11.6 percent. 
B)  13.1 percent. 
C)  -11.6 percent. 
D)  -13.1 percent 
E)  -013.1 percent. 
A)  11.6 percent. 
B)  13.1 percent. 
C)  -11.6 percent. 
D)  -13.1 percent 
E)  -013.1 percent.

Question 6

Sharisse brags to her mother that her starting salary as a management trainee is $36,000, much higher than her mother's starting salary of $21,000 as a management trainee several years ago.If the CPI the year Sharisse begins work is 181.2 and the CPI the year her mother started work was 109.1, Sharisse is

Accepted Answer

A)  wrong.Adjusting for price changes, her salary is less than her mother's salary. 
B)  wrong.Adjusting for quantity changes, her salary is less than her mother's salary. 
C)  correct.Adjusting for price changes, her salary is more than her mother's salary. 
D)  correct.Adjusting for quantity changes, her salary is more than her mother's salary. 
E)  maybe wrong and maybe right.Adjusting for quantity changes, her salary is less than her mother's salary but with the information given we are unable to further adjust for price changes. 
A)  wrong.Adjusting for price changes, her salary is less than her mother's salary. 
B)  wrong.Adjusting for quantity changes, her salary is less than her mother's salary. 
C)  correct.Adjusting for price changes, her salary is more than her mother's salary. 
D)  correct.Adjusting for quantity changes, her salary is more than her mother's salary. 
E)  maybe wrong and maybe right.Adjusting for quantity changes, her salary is less than her mother's salary but with the information given we are unable to further adjust for price changes.

Question 7

The reference base period that the BLS uses to measure the CPI is

Accepted Answer

A)  1982-1984. 
B)  1993-1995. 
C)  1998-2000. 
D)  1967-1969. 
E)  2005. 
A)  1982-1984. 
B)  1993-1995. 
C)  1998-2000. 
D)  1967-1969. 
E)  2005.

Question 8

The bias in the CPI distorts private contracts because

Accepted Answer

A)  a future payment that is linked to the CPI is likely to be raised above the true increase in the price level. 
B)  a worker that links her salary to the CPI is likely to be worse off than a worker that doesn't link her salary to the CPI. 
C)  a lender that links the interest payments on the loan to the CPI is likely to be worse off than a lender that does not link the interest payments on the loan to the CPI. 
D)  a future increase in a payment that is linked to the CPI is likely to be less than the true increase in the price level. 
E)  the CPI cannot properly account for what goods and services a typical urban consumer buys. 
A)  a future payment that is linked to the CPI is likely to be raised above the true increase in the price level. 
B)  a worker that links her salary to the CPI is likely to be worse off than a worker that doesn't link her salary to the CPI. 
C)  a lender that links the interest payments on the loan to the CPI is likely to be worse off than a lender that does not link the interest payments on the loan to the CPI. 
D)  a future increase in a payment that is linked to the CPI is likely to be less than the true increase in the price level. 
E)  the CPI cannot properly account for what goods and services a typical urban consumer buys.

Question 9

The percentage return on a loan expressed in terms of goods and services is the

Accepted Answer

A)  nominal wage rate. 
B)  real interest rate. 
C)  real wage rate. 
D)  nominal interest rate. 
E)  CPI interest rate. 
A)  nominal wage rate. 
B)  real interest rate. 
C)  real wage rate. 
D)  nominal interest rate. 
E)  CPI interest rate.

Question 10

Suppose a report from the Bureau of Labor Statistics states that the CPI for the year 2010 was 152.What is the percentage point increase in the prices of the goods and services since the reference base period?

Accepted Answer

A)  152 percent 
B)  52 percent 
C)  100 percent 
D)  48 percent 
E)  252 percent 
A)  152 percent 
B)  52 percent 
C)  100 percent 
D)  48 percent 
E)  252 percent

Question 11

If prices have decreased 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 12

The GDP price index can be interpreted as

Accepted Answer

A)  (nominal GDP ÷ real GDP) × 100. 
B)  (real GDP ÷ nominal GDP) × 100. 
C)  (nominal GDP + real GDP) ÷ 100. 
D)  (nominal GDP - real GDP) ÷ 100. 
E)  (real GDP - nominal GDP) ÷ 100. 
A)  (nominal GDP ÷ real GDP) × 100. 
B)  (real GDP ÷ nominal GDP) × 100. 
C)  (nominal GDP + real GDP) ÷ 100. 
D)  (nominal GDP - real GDP) ÷ 100. 
E)  (real GDP - nominal GDP) ÷ 100.

Question 13

$$\begin{array} { c c c c } 
\text { Item } & \begin{array} { c } 
\text { Quantity } \
( 2009 )
\end{array} & \begin{array} { c } 
\text { Price } \
( 2009 )
\end{array} & \begin{array} { c } 
\text { Price } \
( 2010 )
\end{array} \
\hline \text { Salt } & 2 & \$ 1.00 & \$ 2.00 \
\text { Bread } & 20 & \$ 2.50 & \$ 3.00 \
\hline
\end{array}$$
-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 2009 is

Accepted Answer

A)  $64.00 
B)  $3.50 
C)  $52.00. 
D)  $5.00 
E)  100. 
A)  $64.00 
B)  $3.50 
C)  $52.00. 
D)  $5.00 
E)  100.

Question 14

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2009 to 2011.The reference base year is 2009.The real wage rate in Syldavia during 2010 was

Accepted Answer

A)  $14.00. 
B)  $15.00. 
C)  $15.79. 
D)  $14.22. 
E)  $14.25. 
A)  $14.00. 
B)  $15.00. 
C)  $15.79. 
D)  $14.22. 
E)  $14.25.

Question 15

When comparing the annual inflation rate in the United States based on the CPI with the annual inflation rate based on the PCE price index, the data show that the

Accepted Answer

A)  CPI measure tends to exceed the PCE price index measure. 
B)  PCE price index measure tends to exceed the CPI measure. 
C)  CPI measure and the PCE price index measure are equal. 
D)  CPI measure and PCE price index measure move in opposite directions. 
E)  CPI deflator and PCE price index cannot be compared because they measure prices of different baskets of goods and services. 
A)  CPI measure tends to exceed the PCE price index measure. 
B)  PCE price index measure tends to exceed the CPI measure. 
C)  CPI measure and the PCE price index measure are equal. 
D)  CPI measure and PCE price index measure move in opposite directions. 
E)  CPI deflator and PCE price index cannot be compared because they measure prices of different baskets of goods and services.

Question 16

The GDP price index

Accepted Answer

A)  can be interpreted as 100 multiplied by real GDP divided by nominal GDP. 
B)  is the difference between nominal GDP and real GDP. 
C)  measures the average price level. 
D)  can be interpreted as real GDP minus nominal GDP and the resulting difference then multiplied by 100. 
E)  is equal to between real GDP minus nominal GDP. 
A)  can be interpreted as 100 multiplied by real GDP divided by nominal GDP. 
B)  is the difference between nominal GDP and real GDP. 
C)  measures the average price level. 
D)  can be interpreted as real GDP minus nominal GDP and the resulting difference then multiplied by 100. 
E)  is equal to between real GDP minus nominal GDP.

Question 17

The items included in the CPI are

Accepted Answer

A)  final goods produced in the United States. 
B)  final goods and services produced in the United States. 
C)  goods and services consumed by the typical urban household. 
D)  only goods and services produced within the current year and consumed by the typical household. 
E)  gods but not services consumed by the typical urban household. 
A)  final goods produced in the United States. 
B)  final goods and services produced in the United States. 
C)  goods and services consumed by the typical urban household. 
D)  only goods and services produced within the current year and consumed by the typical household. 
E)  gods but not services consumed by the typical urban household.

Question 18

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2009 to 2011.The reference base year is 2009.The real interest rate in Syldavia during 2011 was

Accepted Answer

A)  2.8 percent. 
B)  5.2 percent. 
C)  9.0 percent. 
D)  0.6 percent. 
E)  8.4 percent. 
A)  2.8 percent. 
B)  5.2 percent. 
C)  9.0 percent. 
D)  0.6 percent. 
E)  8.4 percent.

Question 19

If the price of a soda was 15 cents in 1970, when the CPI was 50, and 50 cents in 2007 when the CPI was 172, then the real price of

Accepted Answer

A)  a soda has risen 567 percent. 
B)  a soda has risen 350 percent. 
C)  the 1970 soda in 2007 dollars is 52 cents. 
D)  the 2007 soda in 1970 dollars is $3.44. 
E)  the soda was 15 cents in 1970 and 50 cents in 2007. 
A)  a soda has risen 567 percent. 
B)  a soda has risen 350 percent. 
C)  the 1970 soda in 2007 dollars is 52 cents. 
D)  the 2007 soda in 1970 dollars is $3.44. 
E)  the soda was 15 cents in 1970 and 50 cents in 2007.

Question 20

The Consumer Price Index measures the average prices paid by

Accepted Answer

A)  businesses for a fixed market basket of resources. 
B)  businesses for the most frequently used basket of resources. 
C)  urban consumers for a fixed market basket of goods and services. 
D)  urban consumers for the goods and services that most frequently change in price. 
E)  businesses and consumers for a market basket of goods and services. 
A)  businesses for a fixed market basket of resources. 
B)  businesses for the most frequently used basket of resources. 
C)  urban consumers for a fixed market basket of goods and services. 
D)  urban consumers for the goods and services that most frequently change in price. 
E)  businesses and consumers for a market basket of goods and services.

If the bank returns $1,060 on the $1,000 deposited for a year during which inflation was 4 percent, the real interest rate is

In the United States between 1984 and 2009, the

An example of the new goods bias in the calculation of the CPI is a price increase in

When firms decide how much labor to hire, one of the factors that influences them is the

In the current year, the CPI is 160 and during the previous year the CPI was 181.The inflation rate between these years is

The reference base period that the BLS uses to measure the CPI is

The bias in the CPI distorts private contracts because

The percentage return on a loan expressed in terms of goods and services is the

Suppose a report from the Bureau of Labor Statistics states that the CPI for the year 2010 was 152.What is the percentage point increase in the prices of the goods and services since the reference base period?

If prices have decreased since the base period, then

The GDP price index can be interpreted as

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 2009 is

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2009 to 2011.The reference base year is 2009.The real wage rate in Syldavia during 2010 was

When comparing the annual inflation rate in the United States based on the CPI with the annual inflation rate based on the PCE price index, the data show that the

The GDP price index

The items included in the CPI are

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2009 to 2011.The reference base year is 2009.The real interest rate in Syldavia during 2011 was

If the price of a soda was 15 cents in 1970, when the CPI was 50, and 50 cents in 2007 when the CPI was 172, then the real price of

The Consumer Price Index measures the average prices paid by

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 the bank returns $1,060 on the $1,000 deposited for a year during which inflation was 4 percent, the real interest rate is

In the United States between 1984 and 2009, the

An example of the new goods bias in the calculation of the CPI is a price increase in

When firms decide how much labor to hire, one of the factors that influences them is the

In the current year, the CPI is 160 and during the previous year the CPI was 181.The inflation rate between these years is

The reference base period that the BLS uses to measure the CPI is

The bias in the CPI distorts private contracts because

The percentage return on a loan expressed in terms of goods and services is the

Suppose a report from the Bureau of Labor Statistics states that the CPI for the year 2010 was 152.What is the percentage point increase in the prices of the goods and services since the reference base period?

If prices have decreased since the base period, then

The GDP price index can be interpreted as

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 2009 is

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2009 to 2011.The reference base year is 2009.The real wage rate in Syldavia during 2010 was

When comparing the annual inflation rate in the United States based on the CPI with the annual inflation rate based on the PCE price index, the data show that the

The GDP price index

The items included in the CPI are

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2009 to 2011.The reference base year is 2009.The real interest rate in Syldavia during 2011 was

If the price of a soda was 15 cents in 1970, when the CPI was 50, and 50 cents in 2007 when the CPI was 172, then the real price of

The Consumer Price Index measures the average prices paid by

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