Question 1

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

Accepted Answer

A) True 
 B)False

Question 2

Table 11-4
The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. $$\begin{array} { | c | c | c } 
\text { Year } & \begin{array} { c } 
\text { Price of } \
\text { Meat }
\end{array} & \begin{array} { c } 
\text { Price of a } \
\text { Tryy }
\end{array} \
\hline 2004 & \$ 3 \text { per pound } & \$ 2 \
\hline 2005 & \$ 1 \text { per pound } & \$ 7 \
\hline 2006 & \$ 4 \text { per pound } & \$ 5 \
\hline
\end{array}$$
-Refer to Table 11-4. The inflation rate was

Accepted Answer

A) negative in 2005 and negative in 2006. 
B) negative in 2005 and positive in 2006. 
C) positive in 2005 and negative in 2006. 
D) positive in 2005 and positive in 2006. 
A) negative in 2005 and negative in 2006. 
B) negative in 2005 and positive in 2006. 
C) positive in 2005 and negative in 2006. 
D) positive in 2005 and positive in 2006.

Question 3

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

Accepted Answer

A) $17 more in his account, and his purchasing power has increased by $10. 
B) $30 more in his account, and his purchasing power has increased by $50. 
C) $40 more in his account, and his purchasing power has increased by $33. 
D) $50 more in his account, and his purchasing power has increased by $33. 
A) $17 more in his account, and his purchasing power has increased by $10. 
B) $30 more in his account, and his purchasing power has increased by $50. 
C) $40 more in his account, and his purchasing power has increased by $33. 
D) $50 more in his account, and his purchasing power has increased by $33.

Question 4

The consumer price index was 225 in 2006 and 234 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

Accepted Answer

A) 2.5 percent 
B) 4.0 percent 
C) 6.76 percent 
D) 10.5 percent 
A) 2.5 percent 
B) 4.0 percent 
C) 6.76 percent 
D) 10.5 percent

Question 5

Pauline is offered a Job in Minneapolis that pays $80,000. She is offered a similar job in Louisville that pays $71,200. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Accepted Answer

A) 90 in Minneapolis and 83 in Louisville 
B) 90 in Minneapolis and 72 in Louisville 
C) 100 in Minneapolis and 89 in Louisville 
D) 105 in Minneapolis and 90 in Louisville 
A) 90 in Minneapolis and 83 in Louisville 
B) 90 in Minneapolis and 72 in Louisville 
C) 100 in Minneapolis and 89 in Louisville 
D) 105 in Minneapolis and 90 in Louisville

Question 6

During a certain year, the consumer price index increased from 150 to 159 and the purchasing power of a person's bank account increased by 3.5 percent. For that year,

Accepted Answer

A) the nominal interest rate was 6 percent. 
B) the nominal interest rate was 9.5 percent. 
C) the inflation rate was 3.5 percent. 
D) the inflation rate was 9.5 percent. 
A) the nominal interest rate was 6 percent. 
B) the nominal interest rate was 9.5 percent. 
C) the inflation rate was 3.5 percent. 
D) the inflation rate was 9.5 percent.

Question 7

The CPI is a measure of the overall cost of the goods and services bought by a typical consumer.

Accepted Answer

A) True 
 B)False

Question 8

Consternation Corporation has an agreement with its workers to index completely the wage of its employees using the CPI. Consternation Corporation currently pays its production line workers $7.50 an hour and is scheduled to index their wages today. If the CPI is currently 130 and was 125 a year ago, the firm should increase the hourly wages of its workers by

Accepted Answer

A) $0.04. 
B) $0.29. 
C) $0.30. 
D) $0.50. 
A) $0.04. 
B) $0.29. 
C) $0.30. 
D) $0.50.

Question 9

If the CPI was 110 this year and 100 last year, then

Accepted Answer

A) the cost of the CPI basket of goods and services increased by 10 percent this year. 
B) the price level increased by 110 percent this year. 
C) the inflation rate for this year was 10 percent higher than the inflation rate for last year. 
D) All of the above are correct. 
A) the cost of the CPI basket of goods and services increased by 10 percent this year. 
B) the price level increased by 110 percent this year. 
C) the inflation rate for this year was 10 percent higher than the inflation rate for last year. 
D) All of the above are correct.

Question 10

Kristine has a savings account at a bank. If the nominal interest rate she earns exceeds the rate of inflation, then her purchasing power increases over time.

Accepted Answer

A) True 
 B)False

Question 11

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's 2006 salary in 2001 dollars is

Accepted Answer

A) $20,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
B) $20,000; thus, Ruben's purchasing power decreased between 2001 and 2006. 
C) $64,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
D) $64,000; thus, Ruben's purchasing power decreased between 2001 and 2006. 
A) $20,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
B) $20,000; thus, Ruben's purchasing power decreased between 2001 and 2006. 
C) $64,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
D) $64,000; thus, Ruben's purchasing power decreased between 2001 and 2006.

Question 12

The price of DVD players increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

Accepted Answer

A) more than 1 percent. 
B) less than 1 percent. 
C) 1 percent. 
D) None of the above is correct; this particular price increase will not affect the GDP deflator. 
A) more than 1 percent. 
B) less than 1 percent. 
C) 1 percent. 
D) None of the above is correct; this particular price increase will not affect the GDP deflator.

Question 13

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. If 2006 is the base year, then the consumer price index was

Accepted Answer

A) 100 in 2006, 135 in 2007, and 155 in 2008. 
B) 100 in 2006, 270 in 2007, and 310 in 2008. 
C) 200 in 2006, 135 in 2007, and 155 in 2008. 
D) 200 in 2006, 270 in 2007, and 310 in 2008. 
A) 100 in 2006, 135 in 2007, and 155 in 2008. 
B) 100 in 2006, 270 in 2007, and 310 in 2008. 
C) 200 in 2006, 135 in 2007, and 155 in 2008. 
D) 200 in 2006, 270 in 2007, and 310 in 2008.

Question 14

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 2010, then the economy's inflation rate in 2010 was

Accepted Answer

A) 10.5 percent. 
B) 15.0 percent. 
C) 20.0 percent. 
D) 25.00 percent. 
A) 10.5 percent. 
B) 15.0 percent. 
C) 20.0 percent. 
D) 25.00 percent.

Question 15

When the consumer price index falls, the typical family

Accepted Answer

A) has to spend more dollars to maintain the same standard of living. 
B) can spend fewer dollars to maintain the same standard of living. 
C) finds that its standard of living is not affected. 
D) can save less because they do not need to offset the effects of rising prices. 
A) has to spend more dollars to maintain the same standard of living. 
B) can spend fewer dollars to maintain the same standard of living. 
C) finds that its standard of living is not affected. 
D) can save less because they do not need to offset the effects of rising prices.

Question 16

Scenario 11-1
The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 11-1. The price of a 1975 tennis ball in 2005 dollars is

Accepted Answer

A) $0.03. 
B) $0.27. 
C) $0.37. 
D) $1.00. 
A) $0.03. 
B) $0.27. 
C) $0.37. 
D) $1.00.

Question 17

When consumer spending is broken down into the major categories of goods and services, the largest single category is spending on transportation.

Accepted Answer

A) True 
 B)False

Question 18

In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the inflation rate in 2007 was 16 percent, then how much did a magazine cost in 2007?

Accepted Answer

A) $1.87 
B) $2.08 
C) $2.32 
D) $3.00 
A) $1.87 
B) $2.08 
C) $2.32 
D) $3.00

Question 19

Which of the following is the most accurate statement about the effects of quality change on the CPI?

Accepted Answer

A) Even though the BLS adjusts the prices of products in the CPI basket when the quality of the products change, changes in quality are still a problem because quality is so hard to measure. 
B) Because the BLS adjusts the prices of products in the CPI basket when the quality of the products change, changes in quality are no longer a problem for the CPI. 
C) The BLS does not adjust the CPI for quality changes. 
D) Most economists believe that changes in the quality of goods included in the CPI basket do not bias the CPI as a measure of the cost of living. 
A) Even though the BLS adjusts the prices of products in the CPI basket when the quality of the products change, changes in quality are still a problem because quality is so hard to measure. 
B) Because the BLS adjusts the prices of products in the CPI basket when the quality of the products change, changes in quality are no longer a problem for the CPI. 
C) The BLS does not adjust the CPI for quality changes. 
D) Most economists believe that changes in the quality of goods included in the CPI basket do not bias the CPI as a measure of the cost of living.

Question 20

Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that

Accepted Answer

A) the best baseball players today are about 400 times better off than Babe Ruth was in 1931. 
B) because prices have also risen, the standard of living of baseball stars hasn't changed since 1931. 
C) one cannot make judgments about changes in the standard of living based on changes in prices and changes in incomes. 
D) one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931. 
A) the best baseball players today are about 400 times better off than Babe Ruth was in 1931. 
B) because prices have also risen, the standard of living of baseball stars hasn't changed since 1931. 
C) one cannot make judgments about changes in the standard of living based on changes in prices and changes in incomes. 
D) one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931.

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

Table 11-4 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. Year Price of Meat Price of a Tryy 2004 \ 3 per pound \ 2 2005 \ 1 per pound \ 7 2006 \ 4 per pound \ 5 -Refer to Table 11-4. The inflation rate was

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

The consumer price index was 225 in 2006 and 234 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

Pauline is offered a Job in Minneapolis that pays $80,000. She is offered a similar job in Louisville that pays $71,200. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

During a certain year, the consumer price index increased from 150 to 159 and the purchasing power of a person's bank account increased by 3.5 percent. For that year,

The CPI is a measure of the overall cost of the goods and services bought by a typical consumer.

If the CPI was 110 this year and 100 last year, then

Kristine has a savings account at a bank. If the nominal interest rate she earns exceeds the rate of inflation, then her purchasing power increases over time.

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's 2006 salary in 2001 dollars is

The price of DVD players increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

When the consumer price index falls, the typical family

Scenario 11-1 The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 11-1. The price of a 1975 tennis ball in 2005 dollars is

When consumer spending is broken down into the major categories of goods and services, the largest single category is spending on transportation.

Which of the following is the most accurate statement about the effects of quality change on the CPI?

Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that

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

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

Table 11-4 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. Year Price of Meat Price of a Tryy 2004 \ 3 per pound \ 2 2005 \ 1 per pound \ 7 2006 \ 4 per pound \ 5 -Refer to Table 11-4. The inflation rate was

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

The consumer price index was 225 in 2006 and 234 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

Pauline is offered a Job in Minneapolis that pays $80,000. She is offered a similar job in Louisville that pays $71,200. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

During a certain year, the consumer price index increased from 150 to 159 and the purchasing power of a person's bank account increased by 3.5 percent. For that year,

The CPI is a measure of the overall cost of the goods and services bought by a typical consumer.

If the CPI was 110 this year and 100 last year, then

Kristine has a savings account at a bank. If the nominal interest rate she earns exceeds the rate of inflation, then her purchasing power increases over time.

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's 2006 salary in 2001 dollars is

The price of DVD players increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

When the consumer price index falls, the typical family

Scenario 11-1 The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 11-1. The price of a 1975 tennis ball in 2005 dollars is

When consumer spending is broken down into the major categories of goods and services, the largest single category is spending on transportation.

Which of the following is the most accurate statement about the effects of quality change on the CPI?

Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that

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