Question 1

For an imaginary economy, the value of the consumer price index was 140 in 2006 and 149.10 in 2007. The economy's inflation rate for 2007 was

Accepted Answer

A) 6.1 percent. 
B) 6.5 percent. 
C) 9.1 percent. 
D) 49.1 percent. 
A) 6.1 percent. 
B) 6.5 percent. 
C) 9.1 percent. 
D) 49.1 percent.

Question 2

Table 11-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. $$\begin{array} { l c c } 
\hline \text { Year } & \text { Priee of hamburegers } & \text { Prife of hat doges } \
\hline 2009 & \$ 5.00 & \$ 3.00 \
2010 & 5.50 & 3.30 \
2011 & 5.61 & 3.63 \
\hline
\end{array}$$
-Refer to Table 11-6. If the base year is 2010, then the economy's inflation rate is

Accepted Answer

A) 2 percent in 2010 and 7 percent in 2011. 
B) 4.5 percent in 2010 and 5.2 percent in 2011. 
C) 9 percent in 2010 and 5.5 percent in 2011. 
D) 10 percent in 2010 and 6.36 percent in 2011. 
A) 2 percent in 2010 and 7 percent in 2011. 
B) 4.5 percent in 2010 and 5.2 percent in 2011. 
C) 9 percent in 2010 and 5.5 percent in 2011. 
D) 10 percent in 2010 and 6.36 percent in 2011.

Question 3

The CPI and the GDP deflator

Accepted Answer

A) generally move together. 
B) generally show different patterns of movement. 
C) always show identical changes. 
D) always show different patterns of movement. 
A) generally move together. 
B) generally show different patterns of movement. 
C) always show identical changes. 
D) always show different patterns of movement.

Question 4

An increase in the price of bread produced domestically will be reflected in

Accepted Answer

A) both the GDP deflator and the consumer price index. 
B) neither the GDP deflator nor the consumer price index. 
C) the GDP deflator but not in the consumer price index. 
D) the consumer price index but not in the GDP deflator. 
A) both the GDP deflator and the consumer price index. 
B) neither the GDP deflator nor the consumer price index. 
C) the GDP deflator but not in the consumer price index. 
D) the consumer price index but not in the GDP deflator.

Question 5

Suppose a basket of goods and services has been selected to calculate the consumer price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in 2007, it cost $168.75. Which of the following statements is correct?

Accepted Answer

A) Using 2005 as the base year, the economy's inflation rate was higher in 2007 than it was in 2006. 
B) If 2007 is the base year, then the CPI is 33.75 in 2006. 
C) If the CPI is 156.25 in 2007, then 2005 is the base year. 
D) Using 2005 as the base year, the economy's inflation rate for 2006 was 27 percent. 
A) Using 2005 as the base year, the economy's inflation rate was higher in 2007 than it was in 2006. 
B) If 2007 is the base year, then the CPI is 33.75 in 2006. 
C) If the CPI is 156.25 in 2007, then 2005 is the base year. 
D) Using 2005 as the base year, the economy's inflation rate for 2006 was 27 percent.

Question 6

When new goods are introduced, consumers have more variety from which to choose. As a result, each dollar is worth

Accepted Answer

A) more, and the cost of living increases. 
B) more, and the cost of living decreases. 
C) less, and the cost of living increases. 
D) less, and the cost of living decreases. 
A) more, and the cost of living increases. 
B) more, and the cost of living decreases. 
C) less, and the cost of living increases. 
D) less, and the cost of living decreases.

Question 7

The real interest rate tells you how fast the purchasing power of your bank account rises over time.

Accepted Answer

A) True 
 B)False

Question 8

Table 11-11. Megan's salary for three consecutive years, along with other values, are presented in the table below.  
-Refer to Table 11-11. Suppose the consumer price index for 2010 is not necessarily 233.2. Then Megan's 2010 salary represents more purchasing power than her 2008 salary as long as the consumer price index for 2010 is

Accepted Answer

A) greater than 240.00. 
B) less than 240.00. 
C) greater than 233.33. 
D) less than 233.33. 
A) greater than 240.00. 
B) less than 240.00. 
C) greater than 233.33. 
D) less than 233.33.

Question 9

In an imaginary economy, consumers buy only razors and cologne. The fixed basket consists of 6 razors and 4 bottles of cologne. A razor cost $20 in 2009 and $25 in 2010. A bottle of cologne cost $30 in 2009 and $40 in 2010. Using 2009 as the base year, which of the following statements is correct?

Accepted Answer

A) For the typical consumer, the number of dollars spent on razors is equal to the number of dollars spent on cologne in each of the two years. 
B) The consumer price index is 310 in 2010. 
C) The rate of inflation is 29.17% in 2010. 
D) None of the above is correct. 
A) For the typical consumer, the number of dollars spent on razors is equal to the number of dollars spent on cologne in each of the two years. 
B) The consumer price index is 310 in 2010. 
C) The rate of inflation is 29.17% in 2010. 
D) None of the above is correct.

Question 10

Table 11-3
The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Price of a } \
\text { Buak }
\end{array} & \begin{array} { c } 
\text { Price of a } \
\text { Calculator }
\end{array} \
\hline 2006 & \$ 24 & \$ 8 \
\hline 2007 & \$ 30 & \$ 12 \
\hline 2008 & \$ 32 & \$ 15 \
\hline
\end{array}$$
-Refer to Table 11-3. The cost of the basket

Accepted Answer

A) increased from 2006 to 2007 and increased from 2007 to 2008. 
B) increased from 2006 to 2007 and decreased from 2007 to 2008. 
C) decreased from 2006 to 2007 and increased from 2007 to 2008. 
D) decreased from 2006 to 2007 and decreased from 2007 to 2008. 
A) increased from 2006 to 2007 and increased from 2007 to 2008. 
B) increased from 2006 to 2007 and decreased from 2007 to 2008. 
C) decreased from 2006 to 2007 and increased from 2007 to 2008. 
D) decreased from 2006 to 2007 and decreased from 2007 to 2008.

Question 11

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

Accepted Answer

A) $4.75 purchased in 1955. 
B) $20.00 purchased in 1955. 
C) $95.00 purchased in 1955. 
D) $500 purchased in 1955. 
A) $4.75 purchased in 1955. 
B) $20.00 purchased in 1955. 
C) $95.00 purchased in 1955. 
D) $500 purchased in 1955.

Question 12

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

Accepted Answer

A) Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the index, and compute the inflation rate. 
B) Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index. 
C) Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate. 
D) Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index. 
A) Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the index, and compute the inflation rate. 
B) Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index. 
C) Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate. 
D) Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index.

Question 13

The inflation rate is the absolute change in the price level from the previous period.

Accepted Answer

A) True 
 B)False

Question 14

The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate?

Accepted Answer

A) 5.7 percent 
B) 6.0 percent 
C) 7.2 percent 
D) 27.2 percent 
A) 5.7 percent 
B) 6.0 percent 
C) 7.2 percent 
D) 27.2 percent

Question 15

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Accepted Answer

A) Try to include all the goods and services that the typical consumer buys. 
B) Try to weight the goods and services that the typical consumer buys according to how much consumers buy of each item. 
C) Survey consumers to determine what the typical consumer buys. 
D) Survey sellers to determine what the typical consumer buys. 
A) Try to include all the goods and services that the typical consumer buys. 
B) Try to weight the goods and services that the typical consumer buys according to how much consumers buy of each item. 
C) Survey consumers to determine what the typical consumer buys. 
D) Survey sellers to determine what the typical consumer buys.

Question 16

Suppose you know the value of the consumer price index (CPI) in year 2 as well as the inflation rate in year 2. Which of the following equations is valid for the CPI in year 1?

Accepted Answer

A) 
$$\text { CPI in year } 1 = \frac { 100 \times \text { CPI in year } 2 } { \text { Inflation rate in year } 2 \times 100 }$$ 
B) 
$\text { CPI in year } 1 = \frac { 100 + \text { CPI in year } 2 } { \text { Inflation rate in year } 2 + 100 }$ 
C) 
$$\text { CPI in year } 1 = \frac { 100 \times \text { CPI in year } 2 } { \text { Inflation rate in year } 2 + 100 }$$ 
D) 
$$\mathrm { CPI } \text { in year } 1 = \frac { \text { CPI in year } 2 \div 100 } { \text { Inflation rate in year } 2 + 100 }$$ 
A) 
$$\text { CPI in year } 1 = \frac { 100 \times \text { CPI in year } 2 } { \text { Inflation rate in year } 2 \times 100 }$$ 
B) 
$\text { CPI in year } 1 = \frac { 100 + \text { CPI in year } 2 } { \text { Inflation rate in year } 2 + 100 }$ 
C) 
$$\text { CPI in year } 1 = \frac { 100 \times \text { CPI in year } 2 } { \text { Inflation rate in year } 2 + 100 }$$ 
D) 
$$\mathrm { CPI } \text { in year } 1 = \frac { \text { CPI in year } 2 \div 100 } { \text { Inflation rate in year } 2 + 100 }$$

Question 17

Table 11-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. $$\begin{array} { l c c } 
\hline \text { Year } & \text { Priee of hamburegers } & \text { Prife of hat doges } \
\hline 2009 & \$ 5.00 & \$ 3.00 \
2010 & 5.50 & 3.30 \
2011 & 5.61 & 3.63 \
\hline
\end{array}$$
-Refer to Table 11-6. If the base year is 2010, then the consumer price index is

Accepted Answer

A) 100 in 2009, 109 in 2010, and 115 in 2011. 
B) 95.90 in 2009, 100 in 2010, and 107.44 in 2011. 
C) 90.91 in 2009, 100 in 2010, and 106.36 in 2011. 
D) 88.82 in 2009, 100 in 2010, and 107.44 in 2011. 
A) 100 in 2009, 109 in 2010, and 115 in 2011. 
B) 95.90 in 2009, 100 in 2010, and 107.44 in 2011. 
C) 90.91 in 2009, 100 in 2010, and 106.36 in 2011. 
D) 88.82 in 2009, 100 in 2010, and 107.44 in 2011.

Question 18

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

Accepted Answer

A) GDP will increase in 2011. 
B) the producer price index will increase by more than 1.5 percent in 2011. 
C) interest rates will decrease in the future. 
D) the consumer price index will increase in the future. 
A) GDP will increase in 2011. 
B) the producer price index will increase by more than 1.5 percent in 2011. 
C) interest rates will decrease in the future. 
D) the consumer price index will increase in the future.

Question 19

Table 11-5
The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Price of a } \
\text { pilldw }
\end{array} & \begin{array} { c } 
\text { Price af a } \
\text { Hotdlog }
\end{array} \
\hline 2009 & \$ 40 & \$ 3 \
\hline 2010 & \$ 45 & \$ 4 \
\hline 2011 & \$ 50 & \$ 3 \
\hline
\end{array}$$
-Refer to Table 11-5. If the base year is 2009, then the economy's inflation rate in 2010 is

Accepted Answer

A) 20 percent. 
B) 25 percent. 
C) 30 percent. 
D) 120 percent. 
A) 20 percent. 
B) 25 percent. 
C) 30 percent. 
D) 120 percent.

Question 20

The producer price index measures the cost of a basket of goods and services

Accepted Answer

A) typically produced in the economy. 
B) produced for a typical consumer. 
C) sold by producers. 
D) bought by firms. 
A) typically produced in the economy. 
B) produced for a typical consumer. 
C) sold by producers. 
D) bought by firms.

For an imaginary economy, the value of the consumer price index was 140 in 2006 and 149.10 in 2007. The economy's inflation rate for 2007 was

The CPI and the GDP deflator

An increase in the price of bread produced domestically will be reflected in

Suppose a basket of goods and services has been selected to calculate the consumer price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in 2007, it cost $168.75. Which of the following statements is correct?

When new goods are introduced, consumers have more variety from which to choose. As a result, each dollar is worth

The real interest rate tells you how fast the purchasing power of your bank account rises over time.

In an imaginary economy, consumers buy only razors and cologne. The fixed basket consists of 6 razors and 4 bottles of cologne. A razor cost $20 in 2009 and $25 in 2010. A bottle of cologne cost $30 in 2009 and $40 in 2010. Using 2009 as the base year, which of the following statements is correct?

Table 11-3 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. Year Price of a Buak Price of a Calculator 2006 \ 24 \ 8 2007 \ 30 \ 12 2008 \ 32 \ 15 -Refer to Table 11-3. The cost of the basket

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

The inflation rate is the absolute change in the price level from the previous period.

The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate?

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Suppose you know the value of the consumer price index (CPI) in year 2 as well as the inflation rate in year 2. Which of the following equations is valid for the CPI in year 1?

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

The producer price index measures the cost of a basket of goods and services

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Exam 11: Measuring the Cost of Living

For an imaginary economy, the value of the consumer price index was 140 in 2006 and 149.10 in 2007. The economy's inflation rate for 2007 was

The CPI and the GDP deflator

An increase in the price of bread produced domestically will be reflected in

Suppose a basket of goods and services has been selected to calculate the consumer price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in 2007, it cost $168.75. Which of the following statements is correct?

When new goods are introduced, consumers have more variety from which to choose. As a result, each dollar is worth

The real interest rate tells you how fast the purchasing power of your bank account rises over time.

In an imaginary economy, consumers buy only razors and cologne. The fixed basket consists of 6 razors and 4 bottles of cologne. A razor cost $20 in 2009 and $25 in 2010. A bottle of cologne cost $30 in 2009 and $40 in 2010. Using 2009 as the base year, which of the following statements is correct?

Table 11-3 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. Year Price of a Buak Price of a Calculator 2006 \ 24 \ 8 2007 \ 30 \ 12 2008 \ 32 \ 15 -Refer to Table 11-3. The cost of the basket

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

The inflation rate is the absolute change in the price level from the previous period.

The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate?

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Suppose you know the value of the consumer price index (CPI) in year 2 as well as the inflation rate in year 2. Which of the following equations is valid for the CPI in year 1?

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

The producer price index measures the cost of a basket of goods and services

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters