Question 1

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

Accepted Answer

A) True 
 B)False

Question 2

In the United States in the late 1970s, nominal interest rates were high and inflation rates were very high. As a result, real interest rates were

Accepted Answer

A) very high. 
B) high. 
C) low, but never negative. 
D) low, and in some years they were negative. 
A) very high. 
B) high. 
C) low, but never negative. 
D) low, and in some years they were negative.

Question 3

Suppose today's CPI is 134.85, and suppose one must spend $580 today to purchase the same basket of goods and services that could be bought for $400 in 1989. Then the CPI in 1989 was

Accepted Answer

A) 24.27. 
B) 60.68. 
C) 93.00. 
D) 195.53. 
A) 24.27. 
B) 60.68. 
C) 93.00. 
D) 195.53.

Question 4

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

Accepted Answer

A) level of real GDP. 
B) ratio of consumption to GDP. 
C) ratio of net exports to GDP. 
D) standard of living. 
A) level of real GDP. 
B) ratio of consumption to GDP. 
C) ratio of net exports to GDP. 
D) standard of living.

Question 5

An important difference between the GDP deflator and the consumer price index is that

Accepted Answer

A) the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers. 
B) the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers. 
C) the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of all final goods and services bought by consumers. 
D) the GDP deflator reflects the prices of all final goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of all final goods and services bought by consumers. 
A) the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers. 
B) the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers. 
C) the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of all final goods and services bought by consumers. 
D) the GDP deflator reflects the prices of all final goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.

Question 6

With respect to the consumer price index, which of the following serves as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

Accepted Answer

A) rises from $0.80 to $1.00 while the price of a loaf of bread rises from $2.00 to $2.50. 
B) falls from $0.90 to $0.72 while the price of a loaf of bread falls from $2.00 to $1.60. 
C) remains constant, as does the price of a loaf of bread. 
D) None of the above serves as an example of how the substitution bias arises. 
A) rises from $0.80 to $1.00 while the price of a loaf of bread rises from $2.00 to $2.50. 
B) falls from $0.90 to $0.72 while the price of a loaf of bread falls from $2.00 to $1.60. 
C) remains constant, as does the price of a loaf of bread. 
D) None of the above serves as an example of how the substitution bias arises.

Question 7

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. If the nominal interest rate for 2010 is 7.3 percent , then the consumer price index for 2010 is, in fact,

Accepted Answer

A) 210.00. 
B) 216.06. 
C) 220.48. 
D) 226.26. 
A) 210.00. 
B) 216.06. 
C) 220.48. 
D) 226.26.

Question 8

The content of the basket of goods and services used to compute the CPI changes every month.

Accepted Answer

A) True 
 B)False

Question 9

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

Accepted Answer

A) surveying consumers. 
B) surveying sellers of the goods and services. 
C) working backward from the rate of inflation to arrive at imputed values for those quantities. 
D) arbitrary choices made by federal government employees. 
A) surveying consumers. 
B) surveying sellers of the goods and services. 
C) working backward from the rate of inflation to arrive at imputed values for those quantities. 
D) arbitrary choices made by federal government employees.

Question 10

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. If the base year is 2006, then the CPI

Accepted Answer

A) increased from 2004 to 2005 and increased from 2005 to 2006. 
B) increased from 2004 to 2005 and decreased from 2005 to 2006. 
C) decreased from 2004 to 2005 and increased from 2005 to 2006. 
D) decreased from 2004 to 2005 and decreased from 2005 to 2006. 
A) increased from 2004 to 2005 and increased from 2005 to 2006. 
B) increased from 2004 to 2005 and decreased from 2005 to 2006. 
C) decreased from 2004 to 2005 and increased from 2005 to 2006. 
D) decreased from 2004 to 2005 and decreased from 2005 to 2006.

Question 11

Iggie took a university teaching job as an assistant professor in 1974 at a salary of $10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If the price index was 50 in 1974 and 180 in 2003, then what is Iggie's 1974 salary in 2003 dollars?

Accepted Answer

A) $2,777.78 
B) $18,000 
C) $26,000 
D) $36,000 
A) $2,777.78 
B) $18,000 
C) $26,000 
D) $36,000

Question 12

If the quality of a good improves while its price remains the same, then the value of a dollar

Accepted Answer

A) rises and the cost of living increases. 
B) rises and the cost of living decreases. 
C) falls and the cost of living increases. 
D) falls and the cost of living decreases. 
A) rises and the cost of living increases. 
B) rises and the cost of living decreases. 
C) falls and the cost of living increases. 
D) falls and the cost of living decreases.

Question 13

The three problems with using the consumer price index as a measure of the cost of living are

Accepted Answer

A) widely acknowledged and easy to solve. 
B) widely acknowledged and difficult to solve. 
C) nearly unacknowledged and easy to solve. 
D) nearly unacknowledged and difficult to solve. 
A) widely acknowledged and easy to solve. 
B) widely acknowledged and difficult to solve. 
C) nearly unacknowledged and easy to solve. 
D) nearly unacknowledged and difficult to solve.

Question 14

Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

Accepted Answer

A) Ms. Lane will repay the bank fewer dollars than she initially borrowed. 
B) Ms. Lane's repayment will give the bank less purchasing power than it originally loaned her. 
C) Ms. Lane's repayment will give the bank greater purchasing power than it originally loaned her. 
D) Ms. Lane's repayment will give the bank the same purchasing power that it originally loaned her. 
A) Ms. Lane will repay the bank fewer dollars than she initially borrowed. 
B) Ms. Lane's repayment will give the bank less purchasing power than it originally loaned her. 
C) Ms. Lane's repayment will give the bank greater purchasing power than it originally loaned her. 
D) Ms. Lane's repayment will give the bank the same purchasing power that it originally loaned her.

Question 15

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $57.25. The value of the CPI in 2006 was

Accepted Answer

A) 91.6. 
B) 104.6. 
C) 109.2. 
D) 114.5. 
A) 91.6. 
B) 104.6. 
C) 109.2. 
D) 114.5.

Question 16

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Accepted Answer

A) fails to account for consumer spending on housing. 
B) accounts only for consumer spending on food, clothing, and energy. 
C) fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. 
D) fails to account for the introduction of new goods. 
A) fails to account for consumer spending on housing. 
B) accounts only for consumer spending on food, clothing, and energy. 
C) fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. 
D) fails to account for the introduction of new goods.

Question 17

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in

Accepted Answer

A) 1980 and lowest in 1970. 
B) 1980 and lowest in 1990. 
C) 1990 and lowest in 1970. 
D) 1990 and lowest in 1980. 
A) 1980 and lowest in 1970. 
B) 1980 and lowest in 1990. 
C) 1990 and lowest in 1970. 
D) 1990 and lowest in 1980.

Question 18

The GDP deflator reflects the prices of all goods and services produced around the world, whereas the consumer price index reflects the prices of all goods and services bought by consumers.

Accepted Answer

A) True 
 B)False

Question 19

Table 11-1
The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 10 bushels of peaches and 15 bushels of pecans. $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Price of } \
\text { Peaches }
\end{array} & \begin{array} { c } 
\text { Price of } \
\text { Pecans }
\end{array} \
\hline 2005 & \$ 11 \text { per bushd } & \$ 6 \text { per bushel } \
\hline 2006 & \$ 9 \text { per bushed } & \$ 10 \text { per bushe } \
\hline
\end{array}$$
-Refer to Table 11-1. If 2005 is the base year, then the inflation rate in 2006 was

Accepted Answer

A) 16.7 percent. 
B) 20 percent. 
C) 40 percent. 
D) 44.1 percent. 
A) 16.7 percent. 
B) 20 percent. 
C) 40 percent. 
D) 44.1 percent.

Question 20

Between October 2001 and October 2002, the CPI in Canada rose from 116.5 to 119.8 and the CPI in Mexico rose from 93.2 to 102.3. What were the inflation rates for Canada and Mexico over this one-year period?

Accepted Answer

A) 2.8 percent for Canada and 9.1 percent for Mexico 
B) 2.8 percent for Canada and 9.8 percent for Mexico 
C) 3.3 percent for Canada and 9.1 percent for Mexico 
D) 3.3 percent for Canada and 9.8 percent for Mexico 
A) 2.8 percent for Canada and 9.1 percent for Mexico 
B) 2.8 percent for Canada and 9.8 percent for Mexico 
C) 3.3 percent for Canada and 9.1 percent for Mexico 
D) 3.3 percent for Canada and 9.8 percent for Mexico

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

In the United States in the late 1970s, nominal interest rates were high and inflation rates were very high. As a result, real interest rates were

Suppose today's CPI is 134.85, and suppose one must spend $580 today to purchase the same basket of goods and services that could be bought for $400 in 1989. Then the CPI in 1989 was

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

An important difference between the GDP deflator and the consumer price index is that

With respect to the consumer price index, which of the following serves as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

The content of the basket of goods and services used to compute the CPI changes every month.

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

Iggie took a university teaching job as an assistant professor in 1974 at a salary of $10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If the price index was 50 in 1974 and 180 in 2003, then what is Iggie's 1974 salary in 2003 dollars?

If the quality of a good improves while its price remains the same, then the value of a dollar

The three problems with using the consumer price index as a measure of the cost of living are

Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $57.25. The value of the CPI in 2006 was

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in

The GDP deflator reflects the prices of all goods and services produced around the world, whereas the consumer price index reflects the prices of all goods and services bought by consumers.

Between October 2001 and October 2002, the CPI in Canada rose from 116.5 to 119.8 and the CPI in Mexico rose from 93.2 to 102.3. What were the inflation rates for Canada and Mexico over this one-year period?

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

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Exam 11: Measuring the Cost of Living

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

In the United States in the late 1970s, nominal interest rates were high and inflation rates were very high. As a result, real interest rates were

Suppose today's CPI is 134.85, and suppose one must spend $580 today to purchase the same basket of goods and services that could be bought for $400 in 1989. Then the CPI in 1989 was

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

An important difference between the GDP deflator and the consumer price index is that

With respect to the consumer price index, which of the following serves as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

The content of the basket of goods and services used to compute the CPI changes every month.

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

Iggie took a university teaching job as an assistant professor in 1974 at a salary of $10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If the price index was 50 in 1974 and 180 in 2003, then what is Iggie's 1974 salary in 2003 dollars?

If the quality of a good improves while its price remains the same, then the value of a dollar

The three problems with using the consumer price index as a measure of the cost of living are

Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $57.25. The value of the CPI in 2006 was

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in

The GDP deflator reflects the prices of all goods and services produced around the world, whereas the consumer price index reflects the prices of all goods and services bought by consumers.

Between October 2001 and October 2002, the CPI in Canada rose from 116.5 to 119.8 and the CPI in Mexico rose from 93.2 to 102.3. What were the inflation rates for Canada and Mexico over this one-year period?

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