Question 1

If the price index last year was 100 and today it is 167, what is the inflation rate over this period?

Accepted Answer

A) -67 percent 
B) -6.7 percent 
C) 33 percent 
D) 67 percent 
E) 167 percent 
A) -67 percent 
B) -6.7 percent 
C) 33 percent 
D) 67 percent 
E) 167 percent

Question 2

Suppose that last year, the price of strawberries was $2 and the price of milk was $1. This year, the price of milk is $2 and the price of strawberries is $1. Which of the following statements is true?

Accepted Answer

A) The CPI does not change because the change in the two prices is the same. 
B) The CPI increases because milk is more expensive. 
C) The CPI decreases because strawberries are cheaper. 
D) The CPI might increase or decrease depending on the quantities in the CPI market basket. 
E) The change in the CPI depends how the market basket changed between the two years. 
A) The CPI does not change because the change in the two prices is the same. 
B) The CPI increases because milk is more expensive. 
C) The CPI decreases because strawberries are cheaper. 
D) The CPI might increase or decrease depending on the quantities in the CPI market basket. 
E) The change in the CPI depends how the market basket changed between the two years.

Question 3

A ham and cheese sandwich at the local deli costs $4.99 in 2005. If the CPI in 2005 was 90.0 and the CPI today is 121.0, the equivalent price for the ham and cheese sandwich today is

Accepted Answer

A) $4.99. 
B) $5.54. 
C) $5.29. 
D) $6.71. 
E) $6.04. 
A) $4.99. 
B) $5.54. 
C) $5.29. 
D) $6.71. 
E) $6.04.

Question 4

$$\begin{array} { c c c c } 
\text { Item } & \begin{array} { c } 
\text { Quantity } \
\mathbf { ( 2 0 1 1 ) }
\end{array} & \begin{array} { c } 
\text { Price } \
\mathbf { ( 2 0 1 1 ) }
\end{array} & \begin{array} { c } 
\text { Price } \
\mathbf { ( 2 0 1 2 ) }
\end{array} \
\hline \text { Salt } & 2 & \$ 1.00 & \$ 2.00 \
\text { Bread } & 20 & \$ 2.50 & \$ 3.00 \
\hline
\end{array}$$
-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 2011. The CPI in 2012 is

Accepted Answer

A) 100. 
B) 118.8 
C) 123.1 
D) 23.1 
E) 18.8 
A) 100. 
B) 118.8 
C) 123.1 
D) 23.1 
E) 18.8

Question 5

The CPI is a measure of the

Accepted Answer

A) percentage change in the price level. 
B) average prices of all goods. 
C) average prices paid by consumers for a fixed basket of goods and services. 
D) average prices of all goods and services produced. 
E) average change in the output of the goods and services purchased by a typical urban consumer. 
A) percentage change in the price level. 
B) average prices of all goods. 
C) average prices paid by consumers for a fixed basket of goods and services. 
D) average prices of all goods and services produced. 
E) average change in the output of the goods and services purchased by a typical urban consumer.

Question 6

Which of the following statements about the CPI is (are)correct?
I The only significant bias in the CPI is the commodity substitution bias.
Ii. The CPI probably overstates inflation by 1.1 percentage points a year.
Iii. As far as the bias in the CPI is concerned, the new goods bias and the outlet substitution biases are irrelevant.

Accepted Answer

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

Question 7

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 forty 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 forty 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 8

The CPI stands for

Accepted Answer

A) Citizens Paying Index. 
B) Corporate Pricing Index. 
C) Consumer Paying Index. 
D) Consumer Price Index. 
E) Corporate/Consumer Payment Index. 
A) Citizens Paying Index. 
B) Corporate Pricing Index. 
C) Consumer Paying Index. 
D) Consumer Price Index. 
E) Corporate/Consumer Payment Index.

Question 9

In the United States, the inflation rate since 1999 generally was

Accepted Answer

A) higher than between 1979 to 1981. 
B) higher than in the 1980s. 
C) lower than between 1979 to 1981. 
D) much higher than between 1985 to 1995. 
E) negative. 
A) higher than between 1979 to 1981. 
B) higher than in the 1980s. 
C) lower than between 1979 to 1981. 
D) much higher than between 1985 to 1995. 
E) negative.

Question 10

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2010 to 2012. The reference base year is 2010. The real wage rate in Syldavia during 2011 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 11

The CPI market basket is determined by

Accepted Answer

A) tax return data of households. 
B) supermarket purchases recorded by scanner technology. 
C) profit releases of the largest companies. 
D) a consumer survey. 
E) surveys asking large retail companies, such as Wal-Mart, about their sales of consumer goods and services. 
A) tax return data of households. 
B) supermarket purchases recorded by scanner technology. 
C) profit releases of the largest companies. 
D) a consumer survey. 
E) surveys asking large retail companies, such as Wal-Mart, about their sales of consumer goods and services.

Question 12

"The bias in the CPI distorts private contracts because a future payment that is linked to the CPI will be raised above the true increase in the price level." Is the previous sentence true or false?

Accepted Answer

The sentence is correct. The f

Question 13

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 14

Suppose the CPI for this year is 133.7. This number means that

Accepted Answer

A) on average, goods cost $133.70 each this year. 
B) prices rose 33.7 percent over the last year. 
C) prices rose 133.7 percent over the base year. 
D) prices rose 33.7 percent over the base year. 
E) prices rose 133.7 percent over the last year. 
A) on average, goods cost $133.70 each this year. 
B) prices rose 33.7 percent over the last year. 
C) prices rose 133.7 percent over the base year. 
D) prices rose 33.7 percent over the base year. 
E) prices rose 133.7 percent over the last year.

Question 15

The prices of the goods and services in the CPI market basket are collected

Accepted Answer

A) monthly. 
B) yearly. 
C) quarterly. 
D) infrequently. 
E) only when the CPI market basket is determined by the Consumer Expenditure Survey. 
A) monthly. 
B) yearly. 
C) quarterly. 
D) infrequently. 
E) only when the CPI market basket is determined by the Consumer Expenditure Survey.

Question 16

If you get an 8 percent increase in your nominal income, your real income

Accepted Answer

A) definitely increases. 
B) increases only if the inflation rate is more than 8 percent. 
C) increases only if the inflation rate is equal to 8 percent. 
D) increases only if the inflation rate is less than 8 percent. 
E) increases if the inflation rate is more than or equal to 8 percent. 
A) definitely increases. 
B) increases only if the inflation rate is more than 8 percent. 
C) increases only if the inflation rate is equal to 8 percent. 
D) increases only if the inflation rate is less than 8 percent. 
E) increases if the inflation rate is more than or equal to 8 percent.

Question 17

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 18

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 19

$$\begin{array} { l c c c } 
\text { Item } & \begin{array} { c } 
\text { Quantity } \
\mathbf { ( 2 0 1 0 ) }
\end{array} & \begin{array} { c } 
\text { Price } \
\mathbf { ( 2 0 1 0 ) }
\end{array} & \begin{array} { c } 
\text { Price } \
\mathbf { ( 2 0 1 1 ) }
\end{array} \
\hline \text { Oranges } & 50 & \$ 0.90 & \$ 0.75 \
\text { Bananas } & 100 & \$ 0.50 & \$ 0.95 \
\text { Chicken } & 200 & \$ 2.00 & \$ 2.50 \
\text { Beef } & 100 & \$ 5.00 & \$ 4.80 \
\text { Bread } & 300 & \$ 1.75 & \$ 2.00 \
\hline
\end{array}$$
-The table above gives the CPI market basket for 2010 and 2011. Suppose that 2010 is the reference base period.
a. What is the cost of the CPI market basket in 2010?
b. What is the cost of the CPI market basket in 2011?
c. What is the CPI for 2010?
d. What is the CPI for 2011?

Accepted Answer

a. The cost of the CPI market basket in

Question 20

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

If the price index last year was 100 and today it is 167, what is the inflation rate over this period?

Suppose that last year, the price of strawberries was $2 and the price of milk was $1. This year, the price of milk is $2 and the price of strawberries is $1. Which of the following statements is true?

A ham and cheese sandwich at the local deli costs $4.99 in 2005. If the CPI in 2005 was 90.0 and the CPI today is 121.0, the equivalent price for the ham and cheese sandwich today is

Item Quantity Price Price 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 2011. The CPI in 2012 is

The CPI is a measure of the

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 CPI stands for

In the United States, the inflation rate since 1999 generally was

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2010 to 2012. The reference base year is 2010. The real wage rate in Syldavia during 2011 was

The CPI market basket is determined by

"The bias in the CPI distorts private contracts because a future payment that is linked to the CPI will be raised above the true increase in the price level." Is the previous sentence true or false?

The real interest rate equals the

Suppose the CPI for this year is 133.7. This number means that

The prices of the goods and services in the CPI market basket are collected

If you get an 8 percent increase in your nominal income, your real income

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

The CPI market basket

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 16: The Cpi and the Cost of Living

If the price index last year was 100 and today it is 167, what is the inflation rate over this period?

Suppose that last year, the price of strawberries was $2 and the price of milk was $1. This year, the price of milk is $2 and the price of strawberries is $1. Which of the following statements is true?

A ham and cheese sandwich at the local deli costs $4.99 in 2005. If the CPI in 2005 was 90.0 and the CPI today is 121.0, the equivalent price for the ham and cheese sandwich today is

Item Quantity Price Price 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 2011. The CPI in 2012 is

The CPI is a measure of the

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 CPI stands for

In the United States, the inflation rate since 1999 generally was

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2010 to 2012. The reference base year is 2010. The real wage rate in Syldavia during 2011 was

The CPI market basket is determined by

"The bias in the CPI distorts private contracts because a future payment that is linked to the CPI will be raised above the true increase in the price level." Is the previous sentence true or false?

The real interest rate equals the

Suppose the CPI for this year is 133.7. This number means that

The prices of the goods and services in the CPI market basket are collected

If you get an 8 percent increase in your nominal income, your real income

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

The CPI market basket

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters