Question 1

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

Accepted Answer

The inflation rate is the percentage cha

Question 2

To compare the real price of gas in 1975 to the real price in 2011, 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 2011. 
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 2011. 
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 3

The value of the CPI for the reference base period is always

Accepted Answer

A) 100. 
B) 0. 
C) 1. 
D) 50. 
E) None of the above, because the value of the CPI is not always the same for all reference base periods. 
A) 100. 
B) 0. 
C) 1. 
D) 50. 
E) None of the above, because the value of the CPI is not always the same for all reference base periods.

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

Suppose that residents of France have seen their real wage rate increase over time. This means that

Accepted Answer

A) French workers' inflation rate has increased over time. 
B) French workers have increased their average hours of labor over time. 
C) French workers have received increases in their nominal wage rate over time. 
D) French workers have increased buying power. 
E) the CPI must have decreased over time. 
A) French workers' inflation rate has increased over time. 
B) French workers have increased their average hours of labor over time. 
C) French workers have received increases in their nominal wage rate over time. 
D) French workers have increased buying power. 
E) the CPI must have decreased over time.

Question 6

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 7

If in Switzerland in January, 2009 the CPI was 187.4 and in January, 2010 it was 191.1, then the inflation rate in 2010 was

Accepted Answer

A) 1.9 percent. 
B) 3.7 percent. 
C) -1.9 percent. 
D) unknown without the base period index number. 
E) unknown without the real prices. 
A) 1.9 percent. 
B) 3.7 percent. 
C) -1.9 percent. 
D) unknown without the base period index number. 
E) unknown without the real prices.

Question 8

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 9

$$\begin{array} { l c c c c } 
 { \text { Item } } & \begin{array} { c } 
\text { Quantity } \
\mathbf { ( 2 0 1 1 ) }
\end{array} & \begin{array} { l } 
\text { Price } \
\mathbf { ( 2 0 1 1 ) }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\mathbf { ( 2 0 1 2 ) }
\end{array} & \begin{array} { l } 
\text { Price } \
\mathbf { ( 2 0 1 2 ) }
\end{array} \
\hline \text { Sneakers } & 2 & \$ 55 & 2 & \$ 60 \
\text { Manicures } & 1 & \$ 35 & 1 & \$ 40 \
\hline
\end{array}$$
-Consumers in a country buy only two goods, sneakers and manicures. The prices and quantities purchased by urban households are in the table above. The reference base year is 2011. The inflation rate between 2011 and 2012 is

Accepted Answer

A) $15. 
B) 15.0 percent. 
C) $10. 
D) 10.3 percent. 
E) 9.0 percent. 
A) $15. 
B) 15.0 percent. 
C) $10. 
D) 10.3 percent. 
E) 9.0 percent.

Question 10

$$\begin{array} { | l | c | c | c | c | } 
\hline \text { Item } & \begin{array} { c } 
\text { Quantity } \
( 2011 )
\end{array} & \text { Price (2011) } & \begin{array} { c } 
\text { Quantity } \
( 2012 )
\end{array} & \text { Price (2012) } \
\hline \text { Magazines } & 400 & \$ 5.00 & 450 & \$ 4.50 \
\hline \text { Movie tickets } & 50 & \$ 6.00 & 200 & \$ 8.00 \
\hline \text { Pizzas } & 100 & \$ 10.00 & 120 & \$ 10.50 \
\hline
\end{array}$$ 
The data in the table above shows the consumption by families in an economy. The year 2011 is the reference base period.
-Based on the table above, the cost of the base period market basket in 2012 is

Accepted Answer

A) $3,250. 
B) $4,885. 
C) $4,650. 
D) $3,300. 
E) None of the above answers is correct. 
A) $3,250. 
B) $4,885. 
C) $4,650. 
D) $3,300. 
E) None of the above answers is correct.

Question 11

Explain how the nominal wage rate is converted into the real wage rate. Explain why this process of conversion changes the nominal wage rate into the real wage rate.

Accepted Answer

The real wage rate equals the nominal wa

Question 12

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

Accepted Answer

A) cannot 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) cannot 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 13

When a good gets better from one year to the next, the CPI has a what is called

Accepted Answer

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

Question 14

For the CPI to provide an accurate measure of the prices paid by urban consumers, it is necessary to

Accepted Answer

A) assign equal weights to all the goods and services included in the market basket surveyed so that nothing is over-weighted. 
B) have a market basket that is consistent and corresponds to what households actually purchase. 
C) have prices stated in dollars so consumers can compare what they spend. 
D) change the market basket each month to reflect the changes that consumers make. 
E) make certain that the incomes of the consumers surveyed do not change because such a change would affect the market basket of the goods and services they buy. 
A) assign equal weights to all the goods and services included in the market basket surveyed so that nothing is over-weighted. 
B) have a market basket that is consistent and corresponds to what households actually purchase. 
C) have prices stated in dollars so consumers can compare what they spend. 
D) change the market basket each month to reflect the changes that consumers make. 
E) make certain that the incomes of the consumers surveyed do not change because such a change would affect the market basket of the goods and services they buy.

Question 15

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 16

If there is inflation and we compare the changes in a nominal variable over time versus its real counterpart, such as the nominal wage rate versus the real wage rate, we find that the

Accepted Answer

A) two increase at about the same rate because of inflation. 
B) real wage rate increases faster because of inflation. 
C) nominal wage rate increases faster because of inflation. 
D) two decrease at about the same rate because of inflation. 
E) two change at a rate that does not depend on the inflation rate. 
A) two increase at about the same rate because of inflation. 
B) real wage rate increases faster because of inflation. 
C) nominal wage rate increases faster because of inflation. 
D) two decrease at about the same rate because of inflation. 
E) two change at a rate that does not depend on the inflation rate.

Question 17

Suppose the market basket of consumer goods and services costs $180 using the base period prices, and the same basket of goods and services costs $300 using the current period prices. The CPI for the current year period equals

Accepted Answer

A) 166.7. 
B) 66.7. 
C) 160.0. 
D) 60.0. 
E) 300.0. 
A) 166.7. 
B) 66.7. 
C) 160.0. 
D) 60.0. 
E) 300.0.

Question 18

When the cost of the CPI market basket increases from one year to the next, we know that

Accepted Answer

A) on the average, current prices are less than past year prices. 
B) the quantities of the goods and services contained in the CPI market basket have increased on the average. 
C) the prices of the goods and services contained in the CPI market basket have increased on the average. 
D) on the average, current prices are below base year prices. 
E) either the quantities of the goods and services contained in the CPI market basket have increased on the average and/or the prices of the goods and services contained in the CPI market basket have increased on the average. 
A) on the average, current prices are less than past year prices. 
B) the quantities of the goods and services contained in the CPI market basket have increased on the average. 
C) the prices of the goods and services contained in the CPI market basket have increased on the average. 
D) on the average, current prices are below base year prices. 
E) either the quantities of the goods and services contained in the CPI market basket have increased on the average and/or the prices of the goods and services contained in the CPI market basket have increased on the average.

Question 19

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 20

Consumers in Beachland consume only two goods, sodas and DVDs. If they spend $10 on sodas and $90 on DVDs a month, how many sodas and DVDs are in their CPI market basket if the price of a soda is $1 and the price of a DVD is $9?

Accepted Answer

A) 9 sodas and 1 DVD 
B) 1 soda and 9 DVDs 
C) 10 sodas and 9 DVDs 
D) 10 sodas and 10 DVDs 
E) It is impossible to determine the market basket without information on the quantity of at least one of the two goods consumed. 
A) 9 sodas and 1 DVD 
B) 1 soda and 9 DVDs 
C) 10 sodas and 9 DVDs 
D) 10 sodas and 10 DVDs 
E) It is impossible to determine the market basket without information on the quantity of at least one of the two goods consumed.

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

To compare the real price of gas in 1975 to the real price in 2011, we need to know

The value of the CPI for the reference base period is always

The real interest rate is equal to the

Suppose that residents of France have seen their real wage rate increase over time. This means that

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

If in Switzerland in January, 2009 the CPI was 187.4 and in January, 2010 it was 191.1, then the inflation rate in 2010 was

The CPI is biased because it

Explain how the nominal wage rate is converted into the real wage rate. Explain why this process of conversion changes the nominal wage rate into the real wage rate.

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

When a good gets better from one year to the next, the CPI has a what is called

For the CPI to provide an accurate measure of the prices paid by urban consumers, it is necessary to

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

If there is inflation and we compare the changes in a nominal variable over time versus its real counterpart, such as the nominal wage rate versus the real wage rate, we find that the

Suppose the market basket of consumer goods and services costs $180 using the base period prices, and the same basket of goods and services costs $300 using the current period prices. The CPI for the current year period equals

When the cost of the CPI market basket increases from one year to the next, we know that

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

Consumers in Beachland consume only two goods, sodas and DVDs. If they spend $10 on sodas and $90 on DVDs a month, how many sodas and DVDs are in their CPI market basket if the price of a soda is $1 and the price of a DVD is $9?

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

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

To compare the real price of gas in 1975 to the real price in 2011, we need to know

The value of the CPI for the reference base period is always

The real interest rate is equal to the

Suppose that residents of France have seen their real wage rate increase over time. This means that

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

If in Switzerland in January, 2009 the CPI was 187.4 and in January, 2010 it was 191.1, then the inflation rate in 2010 was

The CPI is biased because it

Explain how the nominal wage rate is converted into the real wage rate. Explain why this process of conversion changes the nominal wage rate into the real wage rate.

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

When a good gets better from one year to the next, the CPI has a what is called

For the CPI to provide an accurate measure of the prices paid by urban consumers, it is necessary to

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

If there is inflation and we compare the changes in a nominal variable over time versus its real counterpart, such as the nominal wage rate versus the real wage rate, we find that the

Suppose the market basket of consumer goods and services costs $180 using the base period prices, and the same basket of goods and services costs $300 using the current period prices. The CPI for the current year period equals

When the cost of the CPI market basket increases from one year to the next, we know that

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

Consumers in Beachland consume only two goods, sodas and DVDs. If they spend $10 on sodas and $90 on DVDs a month, how many sodas and DVDs are in their CPI market basket if the price of a soda is $1 and the price of a DVD is $9?

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