Question 1

A change in the real wage rate measures the change in the

Accepted Answer

A)  price of goods and services that an hour's work can buy. 
B)  nominal wage of an hour's work. 
C)  quantity of goods and services that an hour's work can buy. 
D)  inflation rate affecting the labor market. 
E)  CPI. 
A)  price of goods and services that an hour's work can buy. 
B)  nominal wage of an hour's work. 
C)  quantity of goods and services that an hour's work can buy. 
D)  inflation rate affecting the labor market. 
E)  CPI.

Question 2

If the nominal interest rate is greater than the real interest rate,

Accepted Answer

A)  it is an indication of economic growth. 
B)  inflation must be occurring. 
C)  lenders must lose because they can only make loans using the real interest rate. 
D)  the real interest rate must be negative. 
E)  None of the above answers is correct because it is not possible for the nominal interest rate to exceed the real interest rate. 
A)  it is an indication of economic growth. 
B)  inflation must be occurring. 
C)  lenders must lose because they can only make loans using the real interest rate. 
D)  the real interest rate must be negative. 
E)  None of the above answers is correct because it is not possible for the nominal interest rate to exceed the real interest rate.

Question 3

If nominal GDP is $230 for a period and real GDP is $200 for the same period, what is the GDP price index for this period?

Accepted Answer

The GDP price index

Question 4

The bias in the CPI affects government outlays because the overstatement of inflation

Accepted Answer

A)  increases fiscal pressure. 
B)  increases government outlays by more than what is justified. 
C)  decreases social welfare benefits. 
D)  decreases government outlays by more than what is justified. 
E)  means that tax receipts are less than what is needed to cover government outlays. 
A)  increases fiscal pressure. 
B)  increases government outlays by more than what is justified. 
C)  decreases social welfare benefits. 
D)  decreases government outlays by more than what is justified. 
E)  means that tax receipts are less than what is needed to cover government outlays.

Question 5

Is the CPI a biased measure of the inflation rate?
 Explain your answer.

Accepted Answer

There are four sources of bias in the CP

Question 6

The Consumer Price Index (CPI) measures

Accepted Answer

A)  the prices of a few consumer goods and services. 
B)  the prices of those consumer goods and services that increased in price. 
C)  the average of the prices paid by urban consumers for a fixed market basket of goods and services. 
D)  consumer confidence in the economy. 
E)  the average of the costs paid by businesses to produce a fixed market basket of consumer goods and services. 
A)  the prices of a few consumer goods and services. 
B)  the prices of those consumer goods and services that increased in price. 
C)  the average of the prices paid by urban consumers for a fixed market basket of goods and services. 
D)  consumer confidence in the economy. 
E)  the average of the costs paid by businesses to produce a fixed market basket of consumer goods and services.

Question 7

If the inflation rate is greater than the nominal interest rate, then the

Accepted Answer

A)  real interest rate will be negative. 
B)  real interest rate will be positive. 
C)  inflation rate will increase. 
D)  inflation rate will decrease. 
E)  nominal interest rate will be negative. 
A)  real interest rate will be negative. 
B)  real interest rate will be positive. 
C)  inflation rate will increase. 
D)  inflation rate will decrease. 
E)  nominal interest rate will be negative.

Question 8

Between the base period and the next period, prices stay constant.The GDP price index in the next period

Accepted Answer

A)  can not be calculated without knowing how much the quantity changed. 
B)  will equal 0 because there is no change. 
C)  is equal to 100 because there is no change. 
D)  is equal to 1 because there is no change. 
E)  is equal to 50 because there is no change. 
A)  can not be calculated without knowing how much the quantity changed. 
B)  will equal 0 because there is no change. 
C)  is equal to 100 because there is no change. 
D)  is equal to 1 because there is no change. 
E)  is equal to 50 because there is no change.

Question 9

In a small, agricultural nation, consumers buy only steak and potatoes.In 2009, the base year, the typical consumer spent $potatoes on strawberries and $100 on steak.The price of potatoes is $1 and the price of steak is $2 in 2009.In 2009, the price of potatoes is $2 and the price of steak is $1.The CPI for 2010 is

Accepted Answer

A)  80. 
B)  125. 
C)  100. 
D)  110. 
E)  25 percent. 
A)  80. 
B)  125. 
C)  100. 
D)  110. 
E)  25 percent.

Question 10

Real GDP is $1,400 billion and nominal GDP is $1,800.The GDP price index equals

Accepted Answer

A)  100.0. 
B)  77.0. 
C)  128.6 
D)  2.86. 
E)  222.2 
A)  100.0. 
B)  77.0. 
C)  128.6 
D)  2.86. 
E)  222.2

Question 11

If nominal GDP is $2,000 billion and the GDP price index is 120, then real GDP is ________ billion.

Accepted Answer

A)  $2,000. 
B)  $1667 
C)  $16.67 
D)  $240 
E)  $6 
A)  $2,000. 
B)  $1667 
C)  $16.67 
D)  $240 
E)  $6

Question 12

Caroline has saved $100,000 for her retirement.She earned 4 percent interest on that money during the year 2011.If the inflation rate was 1 percent in 2011, what was Caroline's real interest rate?

Accepted Answer

A)  $4,000 
B)  4 percent 
C)  3 percent 
D)  1 percent 
E)  5 percent 
A)  $4,000 
B)  4 percent 
C)  3 percent 
D)  1 percent 
E)  5 percent

Question 13

Suppose the CPI last year was 82.3 and this year is 90.9.Based on this information, we can calculate that the inflation rate in 1981 was

Accepted Answer

A)  10.4 percent. 
B)  8.6 percent. 
C)  90.9 percent. 
D)  82.3 percent. 
E)  9.09 percent. 
A)  10.4 percent. 
B)  8.6 percent. 
C)  90.9 percent. 
D)  82.3 percent. 
E)  9.09 percent.

Question 14

In the 1970s, a period of a high rate of inflation, a news magazine article listed people who were losing from inflation because their real purchasing power was falling.Those who lost the most were university professors.Which of the following explains this?

Accepted Answer

A)  The marginal benefit of their work was falling. 
B)  Their wage rates did not increase as much as the CPI. 
C)  Their wage rates increased more rapidly than the CPI. 
D)  The professors suffered from the CPI bias. 
E)  The professors' market basket was different than the market basket used to calculate the CPI. 
A)  The marginal benefit of their work was falling. 
B)  Their wage rates did not increase as much as the CPI. 
C)  Their wage rates increased more rapidly than the CPI. 
D)  The professors suffered from the CPI bias. 
E)  The professors' market basket was different than the market basket used to calculate the CPI.

Question 15

In the United States, the good or service given the most weight in the CPI basket when calculating the CPI is

Accepted Answer

A)  food and beverages. 
B)  taxes. 
C)  housing. 
D)  medical care. 
E)  recreation. 
A)  food and beverages. 
B)  taxes. 
C)  housing. 
D)  medical care. 
E)  recreation.

Question 16

In constructing the CPI, the BLS has to deal with commodity substitution bias, which is defined as

Accepted Answer

A)  consumers' substitution of discount stores for full service stores to avoid the higher prices in the full service stores. 
B)  consumers' substitution of cheaper goods for goods whose prices increase. 
C)  the bias from quality changes in existing products that cause prices to increase. 
D)  the bias from new goods being introduced that are more expensive than older goods. 
E)  the bias that arises because the BLS changes the CPI market basket each month. 
A)  consumers' substitution of discount stores for full service stores to avoid the higher prices in the full service stores. 
B)  consumers' substitution of cheaper goods for goods whose prices increase. 
C)  the bias from quality changes in existing products that cause prices to increase. 
D)  the bias from new goods being introduced that are more expensive than older goods. 
E)  the bias that arises because the BLS changes the CPI market basket each month.

Question 17

An example of the outlet substitution bias in the calculation of the CPI is a price increase in

Accepted Answer

A)  GPS units versus AAA map books. 
B)  olive oil versus vegetable oil. 
C)  a 2010 Honda Civic relative to a 2004 Honda Civic. 
D)  textbooks bought through the campus bookstore relative to textbooks via Craigslist. 
E)  a trip to Mexico for a couple that had previously taken vacations in Europe 
A)  GPS units versus AAA map books. 
B)  olive oil versus vegetable oil. 
C)  a 2010 Honda Civic relative to a 2004 Honda Civic. 
D)  textbooks bought through the campus bookstore relative to textbooks via Craigslist. 
E)  a trip to Mexico for a couple that had previously taken vacations in Europe

Question 18

In 2009, the nominal wage rate for unionized carpenters was $37.50 and the CPI was 204.Calculate the real wage rate for this group of workers.

Accepted Answer

A)  $37.50 
B)  $47.09 
C)  $5.44. 
D)  $18.38. 
E)  $1.84. 
A)  $37.50 
B)  $47.09 
C)  $5.44. 
D)  $18.38. 
E)  $1.84.

Question 19

The GDP deflator measures

Accepted Answer

A)  the price level. 
B)  the quantity level. 
C)  real GDP. 
D)  nominal GDP. 
E)  the quality of the goods and services in GDP. 
A)  the price level. 
B)  the quantity level. 
C)  real GDP. 
D)  nominal GDP. 
E)  the quality of the goods and services in GDP.

Question 20

In 2010, the reference base period for the CPI for the nation of Wobet, a typical consumer spent $30 on potatoes and $150 on steak.Which of the following is true?

Accepted Answer

A)  The quantity of steak in the basket is larger than the quantity of potatoes. 
B)  The quantity of potatoes in the basket is larger than the quantity of steak. 
C)  The quantity of the two goods in the basket is the same. 
D)  We cannot say exactly how many of each good are in the basket. 
E)  None of the above answers is correct. 
A)  The quantity of steak in the basket is larger than the quantity of potatoes. 
B)  The quantity of potatoes in the basket is larger than the quantity of steak. 
C)  The quantity of the two goods in the basket is the same. 
D)  We cannot say exactly how many of each good are in the basket. 
E)  None of the above answers is correct.

A change in the real wage rate measures the change in the

If the nominal interest rate is greater than the real interest rate,

If nominal GDP is $230 for a period and real GDP is $200 for the same period, what is the GDP price index for this period?

The bias in the CPI affects government outlays because the overstatement of inflation

Is the CPI a biased measure of the inflation rate? Explain your answer.

The Consumer Price Index (CPI) measures

If the inflation rate is greater than the nominal interest rate, then the

Between the base period and the next period, prices stay constant.The GDP price index in the next period

Real GDP is $1,400 billion and nominal GDP is $1,800.The GDP price index equals

If nominal GDP is $2,000 billion and the GDP price index is 120, then real GDP is ________ billion.

Caroline has saved $100,000 for her retirement.She earned 4 percent interest on that money during the year 2011.If the inflation rate was 1 percent in 2011, what was Caroline's real interest rate?

Suppose the CPI last year was 82.3 and this year is 90.9.Based on this information, we can calculate that the inflation rate in 1981 was

In the 1970s, a period of a high rate of inflation, a news magazine article listed people who were losing from inflation because their real purchasing power was falling.Those who lost the most were university professors.Which of the following explains this?

In the United States, the good or service given the most weight in the CPI basket when calculating the CPI is

In constructing the CPI, the BLS has to deal with commodity substitution bias, which is defined as

An example of the outlet substitution bias in the calculation of the CPI is a price increase in

In 2009, the nominal wage rate for unionized carpenters was $37.50 and the CPI was 204.Calculate the real wage rate for this group of workers.

The GDP deflator measures

In 2010, the reference base period for the CPI for the nation of Wobet, a typical consumer spent $30 on potatoes and $150 on steak.Which of the following is true?

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

A change in the real wage rate measures the change in the

If the nominal interest rate is greater than the real interest rate,

If nominal GDP is $230 for a period and real GDP is $200 for the same period, what is the GDP price index for this period?

The bias in the CPI affects government outlays because the overstatement of inflation

Is the CPI a biased measure of the inflation rate? Explain your answer.

The Consumer Price Index (CPI) measures

If the inflation rate is greater than the nominal interest rate, then the

Between the base period and the next period, prices stay constant.The GDP price index in the next period

Real GDP is $1,400 billion and nominal GDP is $1,800.The GDP price index equals

If nominal GDP is $2,000 billion and the GDP price index is 120, then real GDP is ________ billion.

Caroline has saved $100,000 for her retirement.She earned 4 percent interest on that money during the year 2011.If the inflation rate was 1 percent in 2011, what was Caroline's real interest rate?

Suppose the CPI last year was 82.3 and this year is 90.9.Based on this information, we can calculate that the inflation rate in 1981 was

In the 1970s, a period of a high rate of inflation, a news magazine article listed people who were losing from inflation because their real purchasing power was falling.Those who lost the most were university professors.Which of the following explains this?

In the United States, the good or service given the most weight in the CPI basket when calculating the CPI is

In constructing the CPI, the BLS has to deal with commodity substitution bias, which is defined as

An example of the outlet substitution bias in the calculation of the CPI is a price increase in

In 2009, the nominal wage rate for unionized carpenters was $37.50 and the CPI was 204.Calculate the real wage rate for this group of workers.

The GDP deflator measures

In 2010, the reference base period for the CPI for the nation of Wobet, a typical consumer spent $30 on potatoes and $150 on steak.Which of the following is true?

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