Question 1

The Consumer Price Index market basket contains

Accepted Answer

A)  the minimal dietary requirements of an average urban household. 
B)  the U.S.-produced goods and services purchased by an average urban household. 
C)  the ideal calorie intake of each member of an average urban household. 
D)  the goods and services purchased by an average urban household. 
E)  the goods and services that the economists working for the BLS believes consumers should buy. 
A)  the minimal dietary requirements of an average urban household. 
B)  the U.S.-produced goods and services purchased by an average urban household. 
C)  the ideal calorie intake of each member of an average urban household. 
D)  the goods and services purchased by an average urban household. 
E)  the goods and services that the economists working for the BLS believes consumers should buy.

Question 2

A country's CPI was 84.5 last year and 100.0 this year.The inflation rate was

Accepted Answer

A)  84.5 percent. 
B)  18.3 percent. 
C)  15.5 percent. 
D)  7.29 percent. 
E)  -18 percent. 
A)  84.5 percent. 
B)  18.3 percent. 
C)  15.5 percent. 
D)  7.29 percent. 
E)  -18 percent.

Question 3

When the price of broccoli increase relative to cauliflower, people who buy fresh vegetables respond by buying more cauliflower and fewer broccoli.As a result, the CPI has a

Accepted Answer

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

Question 4

The real interest rate is equal to the

Accepted Answer

A)  nominal interest rate plus the inflation rate. 
B)  nominal interest rate minus the inflation rate. 
C)  nominal interest rate times the inflation rate. 
D)  nominal interest rate divided by the inflation rate. 
E)  inflation rate minus the nominal interest rate. 
A)  nominal interest rate plus the inflation rate. 
B)  nominal interest rate minus the inflation rate. 
C)  nominal interest rate times the inflation rate. 
D)  nominal interest rate divided by the inflation rate. 
E)  inflation rate minus the nominal interest rate.

Question 5

If you have the cost of the CPI market basket at current prices and the cost of the CPI market basket at base period prices, how do you calculate the CPI?

Accepted Answer

The answer of If you have the cost of the...

Question 6

The ________ is the average hourly wage rate measured in current dollars, while the ________ is the average hourly rate measured in the dollars of a given reference base year.

Accepted Answer

A)  real interest rate; nominal interest rate 
B)  nominal wage rate; real wage rate 
C)  real wage rate; nominal wage rate 
D)  nominal interest rate; real interest rate 
E)  inflation rate; real wage rate 
A)  real interest rate; nominal interest rate 
B)  nominal wage rate; real wage rate 
C)  real wage rate; nominal wage rate 
D)  nominal interest rate; real interest rate 
E)  inflation rate; real wage rate

Question 7

$$\begin{array} { c c } 
\text { Year } & \text { CPI } \
\hline 2008 & 100.0 \
2009 & 102.5 \
2010 & 106.0 \
2011 & 111.0
\end{array}$$
-Scott worked in a large foreign country.He retired in 2008 and his pension income is fixed at $1,500 per month.The table above gives the CPI in this country.What is the real monthly value of his pension in the years between 2008 and 2011?

Accepted Answer

To calculate the real value of the pensi

Question 8

You borrow at a nominal interest rate of 10 percent.If the inflation rate is 4 percent, then the real interest rate is

Accepted Answer

A)  the $10 in interest you have to pay. 
B)  16 percent. 
C)  2.5 percent. 
D)  6 percent. 
E)  14 percent. 
A)  the $10 in interest you have to pay. 
B)  16 percent. 
C)  2.5 percent. 
D)  6 percent. 
E)  14 percent.

Question 9

If the CPI is 170 at the beginning of the year and 181 at the end, and a bank is paying a nominal interest rate of 6 percent, we see that

Accepted Answer

A)  the real interest rate is negative. 
B)  the interest nominal rate is negative. 
C)  the real interest rate is positive and is less than 1 percent. 
D)  the real interest rate is positive and is larger than 1 percent. 
E)  the real interest rate is equal to zero. 
A)  the real interest rate is negative. 
B)  the interest nominal rate is negative. 
C)  the real interest rate is positive and is less than 1 percent. 
D)  the real interest rate is positive and is larger than 1 percent. 
E)  the real interest rate is equal to zero.

Question 10

If the CPI is 231.4 in one year and is 241.2 in the next year, then the inflation rate equals

Accepted Answer

A)  (241.2-231.4) × 100. 
B)  $\frac { ( 241.2 - 231.4 ) } { 231.4 }$ × 100. 
C)  $\frac { ( 241.2 - 231.4 ) } { 241.2 }$ × 100. 
D)  $\frac { ( 231.4 - 241.2 ) } { 231.4 }$ × 100. 
E)  $\frac { ( 231.4 - 241.2 ) } { 241.2 }$ × 100. 
A)  (241.2-231.4) × 100. 
B)  $\frac { ( 241.2 - 231.4 ) } { 231.4 }$ × 100. 
C)  $\frac { ( 241.2 - 231.4 ) } { 241.2 }$ × 100. 
D)  $\frac { ( 231.4 - 241.2 ) } { 231.4 }$ × 100. 
E)  $\frac { ( 231.4 - 241.2 ) } { 241.2 }$ × 100.

Question 11

Suppose that in 2010, real GDP is larger than nominal GDP.The GDP price index in 2010 is definitely

Accepted Answer

A)  negative. 
B)  larger than the GDP price index in 2010. 
C)  less than the GDP price index in 2010. 
D)  greater than 100. 
E)  less than 100. 
A)  negative. 
B)  larger than the GDP price index in 2010. 
C)  less than the GDP price index in 2010. 
D)  greater than 100. 
E)  less than 100.

Question 12

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 two inflation rates

Accepted Answer

A)  move in opposite directions. 
B)  remained constant over the forty year period after 1979. 
C)  steadily increased over the forth year period after 1979. 
D)  move up and down in similar but not identical ways. 
E)  both fluctuate but the fluctuations have little relationship to each other. 
A)  move in opposite directions. 
B)  remained constant over the forty year period after 1979. 
C)  steadily increased over the forth year period after 1979. 
D)  move up and down in similar but not identical ways. 
E)  both fluctuate but the fluctuations have little relationship to each other.

Question 13

The fact that the CPI is a biased measure of the inflation rate means government outlays will

Accepted Answer

A)  increase at a faster rate than the actual inflation rate. 
B)  increase at the same rate as the actual inflation rate. 
C)  increase at a slower rate than the actual inflation rate. 
D)  sometimes increase faster and sometimes increase slower than the actual inflation rate depending on whether the actual inflation rate exceeds 1.1 percent per year or is less than 1.1 percent per year. 
E)  None of the above because the bias in inflation measured using the CPI has nothing to do with government outlays. 
A)  increase at a faster rate than the actual inflation rate. 
B)  increase at the same rate as the actual inflation rate. 
C)  increase at a slower rate than the actual inflation rate. 
D)  sometimes increase faster and sometimes increase slower than the actual inflation rate depending on whether the actual inflation rate exceeds 1.1 percent per year or is less than 1.1 percent per year. 
E)  None of the above because the bias in inflation measured using the CPI has nothing to do with government outlays.

Question 14

The price survey of the goods contained in the CPI market basket is conducted

Accepted Answer

A)  every ten years, along with the Census. 
B)  infrequently, because of its high cost. 
C)  every year. 
D)  monthly. 
E)  every quarter. 
A)  every ten years, along with the Census. 
B)  infrequently, because of its high cost. 
C)  every year. 
D)  monthly. 
E)  every quarter.

Question 15

For each of the following values of nominal GDP and real GDP, calculate the GDP price index.
a. Nominal GDP = $600; real GDP = $800.
b. Nominal GDP = $900; real GDP = $900.
c. Nominal GDP = $1,200; real GDP = $1,000.

Accepted Answer

a. The GDP price index equals

Question 16

If the CPI decreases from one year to the next, then the inflation rate is

Accepted Answer

A)  positive. 
B)  above 100. 
C)  below 100. 
D)  negative. 
E)  0. 
A)  positive. 
B)  above 100. 
C)  below 100. 
D)  negative. 
E)  0.

Question 17

The CPI market basket

Accepted Answer

A)  weights the goods and services according to the budget of an average urban household. 
B)  determines the best possible way of taxing the average urban household. 
C)  determines how the spending patterns of the average urban household change from month to month. 
D)  determines how spending patterns change from urban household to urban household. 
E)  changes from one month to the next in order to calculate the CPI. 
A)  weights the goods and services according to the budget of an average urban household. 
B)  determines the best possible way of taxing the average urban household. 
C)  determines how the spending patterns of the average urban household change from month to month. 
D)  determines how spending patterns change from urban household to urban household. 
E)  changes from one month to the next in order to calculate the CPI.

Question 18

$$\begin{array} { c c } 
\text { Year } & \text { CPI } \
\hline 1994 & 90.0 \
1996 & 95.5 \
1998 - 2000 & 100.0 \
2002 & 104.0
\end{array}$$
-If the cost of the CPI market basket at current period prices is $1000 and the cost of the CPI market basket at base period prices is $250, the CPI is

Accepted Answer

A)  4.0. 
B)  400. 
C)  250. 
D)  100. 
E)  2.50. 
A)  4.0. 
B)  400. 
C)  250. 
D)  100. 
E)  2.50.

Question 19

Assume that after you graduate, you move to a simple economy in which only three goods are produced and consumed: fish, fruit, and meat.Suppose that on January 1, fish sold for $2.50 per pound, meat was $3.00 per pound, and fruit was $1.50 per pound.At the end of the year, you discover that the catch was low and that fish prices had increased to $5.00 per pound, but fruit prices stayed at $1.50 per pound, and meat prices had actually fallen to $2.00.Can you say what happened to the overall CPI, in terms of whether it increased, decreased, or stayed the same?
 Do you have enough information to calculate the inflation rate?
 Note, this problem requires no calculation; just state and explain your answers.

Accepted Answer

You cannot say what happened to the CPI

Question 20

Looking at real and nominal interest rates in the United States since 1968, we see that the

Accepted Answer

A)  nominal interest rate has at times been negative. 
B)  real interest rate has been greater than 10 percent for most years. 
C)  real interest rate has at times been negative. 
D)  real interest rate was above 5 percent during the low inflation of the 1970s. 
E)  real interest is generally greater than the nominal interest rate. 
A)  nominal interest rate has at times been negative. 
B)  real interest rate has been greater than 10 percent for most years. 
C)  real interest rate has at times been negative. 
D)  real interest rate was above 5 percent during the low inflation of the 1970s. 
E)  real interest is generally greater than the nominal interest rate.

The Consumer Price Index market basket contains

A country's CPI was 84.5 last year and 100.0 this year.The inflation rate was

When the price of broccoli increase relative to cauliflower, people who buy fresh vegetables respond by buying more cauliflower and fewer broccoli.As a result, the CPI has a

The real interest rate is equal to the

If you have the cost of the CPI market basket at current prices and the cost of the CPI market basket at base period prices, how do you calculate the CPI?

The is the average hourly wage rate measured in current dollars, while the is the average hourly rate measured in the dollars of a given reference base year.

Year CPI 2008 100.0 2009 102.5 2010 106.0 2011 111.0 -Scott worked in a large foreign country.He retired in 2008 and his pension income is fixed at $1,500 per month.The table above gives the CPI in this country.What is the real monthly value of his pension in the years between 2008 and 2011?

You borrow at a nominal interest rate of 10 percent.If the inflation rate is 4 percent, then the real interest rate is

If the CPI is 170 at the beginning of the year and 181 at the end, and a bank is paying a nominal interest rate of 6 percent, we see that

If the CPI is 231.4 in one year and is 241.2 in the next year, then the inflation rate equals

Suppose that in 2010, real GDP is larger than nominal GDP.The GDP price index in 2010 is definitely

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 two inflation rates

The fact that the CPI is a biased measure of the inflation rate means government outlays will

The price survey of the goods contained in the CPI market basket is conducted

For each of the following values of nominal GDP and real GDP, calculate the GDP price index. a. Nominal GDP = $600; real GDP = $800. b. Nominal GDP = $900; real GDP = $900. c. Nominal GDP = $1,200; real GDP = $1,000.

If the CPI decreases from one year to the next, then the inflation rate is

The CPI market basket

Year CPI 1994 90.0 1996 95.5 1998-2000 100.0 2002 104.0 -If the cost of the CPI market basket at current period prices is $1000 and the cost of the CPI market basket at base period prices is $250, the CPI is

Looking at real and nominal interest rates in the United States since 1968, we see that the

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 Consumer Price Index market basket contains

A country's CPI was 84.5 last year and 100.0 this year.The inflation rate was

When the price of broccoli increase relative to cauliflower, people who buy fresh vegetables respond by buying more cauliflower and fewer broccoli.As a result, the CPI has a

The real interest rate is equal to the

If you have the cost of the CPI market basket at current prices and the cost of the CPI market basket at base period prices, how do you calculate the CPI?

The ________ is the average hourly wage rate measured in current dollars, while the ________ is the average hourly rate measured in the dollars of a given reference base year.

Year CPI 2008 100.0 2009 102.5 2010 106.0 2011 111.0 -Scott worked in a large foreign country.He retired in 2008 and his pension income is fixed at $1,500 per month.The table above gives the CPI in this country.What is the real monthly value of his pension in the years between 2008 and 2011?

You borrow at a nominal interest rate of 10 percent.If the inflation rate is 4 percent, then the real interest rate is

If the CPI is 170 at the beginning of the year and 181 at the end, and a bank is paying a nominal interest rate of 6 percent, we see that

If the CPI is 231.4 in one year and is 241.2 in the next year, then the inflation rate equals

Suppose that in 2010, real GDP is larger than nominal GDP.The GDP price index in 2010 is definitely

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 two inflation rates

The fact that the CPI is a biased measure of the inflation rate means government outlays will

The price survey of the goods contained in the CPI market basket is conducted

For each of the following values of nominal GDP and real GDP, calculate the GDP price index. a. Nominal GDP = $600; real GDP = $800. b. Nominal GDP = $900; real GDP = $900. c. Nominal GDP = $1,200; real GDP = $1,000.

If the CPI decreases from one year to the next, then the inflation rate is

The CPI market basket

Year CPI 1994 90.0 1996 95.5 1998-2000 100.0 2002 104.0 -If the cost of the CPI market basket at current period prices is $1000 and the cost of the CPI market basket at base period prices is $250, the CPI is

Looking at real and nominal interest rates in the United States since 1968, we see that the

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 is the average hourly wage rate measured in current dollars, while the is the average hourly rate measured in the dollars of a given reference base year.