Question 1

Which of the following best defines the inflation rate?

Accepted Answer

A) the price level 
B) the change in the price level 
C) the price level divided by the price level in the previous period 
D) the percentage change in the price level from the previous period 
A) the price level 
B) the change in the price level 
C) the price level divided by the price level in the previous period 
D) the percentage change in the price level from the previous period

Question 2

Which of the following best describes nominal interest rates and real interest rates in the 1970s and 1990s?

Accepted Answer

A) Nominal interest rates were high in the 1970s, and real interest rates were high in the 1990s. 
B) Nominal interest rates were high in the 1970s, and real interest rates were low in the 1990s. 
C) Nominal interest rates were high in the 1990s, and real interest rates were high in the 1970s. 
D) Nominal interest rates were high in the 1990s, and real interest rates were low in the 1970s. 
A) Nominal interest rates were high in the 1970s, and real interest rates were high in the 1990s. 
B) Nominal interest rates were high in the 1970s, and real interest rates were low in the 1990s. 
C) Nominal interest rates were high in the 1990s, and real interest rates were high in the 1970s. 
D) Nominal interest rates were high in the 1990s, and real interest rates were low in the 1970s.

Question 3

Which of the following is NOT a widely acknowledged problem with the CPI as a measure of the cost of living?

Accepted Answer

A) substitution bias 
B) introduction of new goods 
C) unmeasured quality change 
D) unmeasured price change 
A) substitution bias 
B) introduction of new goods 
C) unmeasured quality change 
D) unmeasured price change

Question 4

In 1972 in Sarnia, Ontario, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost about $6.00, which of the following sets of CPIs would make the cost in today's dollars the same for both years?

Accepted Answer

A) 60 in 1972 and 150 today 
B) 65 in 1972 and 156 today 
C) 90 in 1972 and 145.8 today 
D) 100 in 1972 1nd 41.67 today 
A) 60 in 1972 and 150 today 
B) 65 in 1972 and 156 today 
C) 90 in 1972 and 145.8 today 
D) 100 in 1972 1nd 41.67 today

Question 5

How are the weights on the various goods and services in the CPI basket determined?

Accepted Answer

A) Each good and service is weighted according to its quantity. 
B) A survey is conducted to determine how much of each good and service typical consumers purchase. 
C) The weights equal the ratio of expenditures on each good or service divided by the total consumption expenditures in the GDP accounts. 
D) Each good and service is weighted according to its price. 
A) Each good and service is weighted according to its quantity. 
B) A survey is conducted to determine how much of each good and service typical consumers purchase. 
C) The weights equal the ratio of expenditures on each good or service divided by the total consumption expenditures in the GDP accounts. 
D) Each good and service is weighted according to its price.

Question 6

Babe Ruth's 1931 salary was $80 000. The price index for 1931 is 15.2 and the price index for 2010 is 195. What would Ruth's 1931 salary be equivalent to in 2010?

Accepted Answer

A) $536 000 
B) $635 000 
C) $828 000 
D) $1 026 000 
A) $536 000 
B) $635 000 
C) $828 000 
D) $1 026 000

Question 7

Andrew is offered a job in Calgary where the CPI is 120 and a job in Toronto where the CPI is 150. Andrew's job offer in Calgary is for $65 000. Which of the following salaries would the Toronto job have to pay so that both jobs would have the same purchasing power?

Accepted Answer

A) $52 000 
B) $60 266 
C) $65 625 
D) $81 250 
A) $52 000 
B) $60 266 
C) $65 625 
D) $81 250

Question 8

Use the table below to answer the following questions.
Table 6-2
  
-Refer to Table 6-2. Suppose that the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the consumer price index for 2011 if the base year is 2010?

Accepted Answer

A) 120 
B) 109.22 
C) 136.11 
D) 150 
A) 120 
B) 109.22 
C) 136.11 
D) 150

Question 9

What is the purpose of measuring the overall level of prices in the economy?

Accepted Answer

A) to allow the measurement of GDP 
B) to allow consumers to know what kinds of prices to expect in the future 
C) to allow comparison between dollar figures from different points in time 
D) to allow government officials to determine whether the value of the dollar has increased or decreased 
A) to allow the measurement of GDP 
B) to allow consumers to know what kinds of prices to expect in the future 
C) to allow comparison between dollar figures from different points in time 
D) to allow government officials to determine whether the value of the dollar has increased or decreased

Question 10

The price of imported athletic shoes produced by a Canadian company operating in Thailand increases. By itself, what effect will this change have on the Canadian GDP deflator and CPI?

Accepted Answer

A) The GDP deflator and the CPI will both increase. 
B) The GDP deflator will increase, and the CPI will be unaffected. 
C) The GDP deflator and the CPI will both be unaffected. 
D) The GDP deflator will be unaffected, and the CPI will increase. 
A) The GDP deflator and the CPI will both increase. 
B) The GDP deflator will increase, and the CPI will be unaffected. 
C) The GDP deflator and the CPI will both be unaffected. 
D) The GDP deflator will be unaffected, and the CPI will increase.

Question 11

Which of the following prices change when an inflation rate is calculated using the CPI?

Accepted Answer

A) all prices 
B) the prices of all final goods and services 
C) the prices of all consumer goods 
D) the prices of some consumer goods 
A) all prices 
B) the prices of all final goods and services 
C) the prices of all consumer goods 
D) the prices of some consumer goods

Question 12

Jake loaned Elwood $6000 for one year at a nominal interest rate of 12 percent. After Elwood repaid the loan in full, Jake complained that he could buy 5 percent fewer goods with the money Elwood gave him than he could before he loaned Elwood the $6000. What was the rate of inflation during the year?

Accepted Answer

A) 2.5 percent 
B) 7 percent 
C) 8 percent 
D) 17 percent 
A) 2.5 percent 
B) 7 percent 
C) 8 percent 
D) 17 percent

Question 13

What does the CPI measure?

Accepted Answer

A) the overall price of inputs purchased by a typical producer 
B) the overall price of goods and services bought by a typical consumer 
C) the overall price of goods and services produced in the economy 
D) the overall price of stocks on the Toronto Stock Exchange 
A) the overall price of inputs purchased by a typical producer 
B) the overall price of goods and services bought by a typical consumer 
C) the overall price of goods and services produced in the economy 
D) the overall price of stocks on the Toronto Stock Exchange

Question 14

Mavis Corporation has an agreement with its workers to completely index the wages of its employees to inflation in the CPI. Mavis currently pays its production line workers $10 an hour and is scheduled to index their wages today. If the CPI is currently about 120 and was 100 a year ago, by how much should Mavis increase the hourly wages of its workers?

Accepted Answer

A) $0.58 
B) $0.65 
C) $1.00 
D) $2.00 
A) $0.58 
B) $0.65 
C) $1.00 
D) $2.00

Question 15

Suppose that Canadian mining companies purchase German-made ore trucks at a reduced price. By itself what will this do to the GDP deflator and the consumer price index?

Accepted Answer

A) The consumer price index will fall, and the GDP deflator will fall. 
B) The consumer price index and the GDP deflator will be unaffected. 
C) The consumer price index will fall, and the GDP deflator will be unaffected. 
D) The consumer price index will be unaffected, and the GDP deflator will fall. 
A) The consumer price index will fall, and the GDP deflator will fall. 
B) The consumer price index and the GDP deflator will be unaffected. 
C) The consumer price index will fall, and the GDP deflator will be unaffected. 
D) The consumer price index will be unaffected, and the GDP deflator will fall.

Question 16

Why does the GDP deflator give a different rate of inflation than does the CPI?

Accepted Answer

The GDP deflator and the CPI differ in t

Which of the following best defines the inflation rate?

Which of the following best describes nominal interest rates and real interest rates in the 1970s and 1990s?

Which of the following is NOT a widely acknowledged problem with the CPI as a measure of the cost of living?

In 1972 in Sarnia, Ontario, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost about $6.00, which of the following sets of CPIs would make the cost in today's dollars the same for both years?

How are the weights on the various goods and services in the CPI basket determined?

Babe Ruth's 1931 salary was $80 000. The price index for 1931 is 15.2 and the price index for 2010 is 195. What would Ruth's 1931 salary be equivalent to in 2010?

Andrew is offered a job in Calgary where the CPI is 120 and a job in Toronto where the CPI is 150. Andrew's job offer in Calgary is for $65 000. Which of the following salaries would the Toronto job have to pay so that both jobs would have the same purchasing power?

Use the table below to answer the following questions. Table 6-2 -Refer to Table 6-2. Suppose that the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the consumer price index for 2011 if the base year is 2010?

What is the purpose of measuring the overall level of prices in the economy?

The price of imported athletic shoes produced by a Canadian company operating in Thailand increases. By itself, what effect will this change have on the Canadian GDP deflator and CPI?

Which of the following prices change when an inflation rate is calculated using the CPI?

What does the CPI measure?

Suppose that Canadian mining companies purchase German-made ore trucks at a reduced price. By itself what will this do to the GDP deflator and the consumer price index?

Why does the GDP deflator give a different rate of inflation than does the CPI?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

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 Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 6: Measuring the Cost of Living

Which of the following best defines the inflation rate?

Which of the following best describes nominal interest rates and real interest rates in the 1970s and 1990s?

Which of the following is NOT a widely acknowledged problem with the CPI as a measure of the cost of living?

In 1972 in Sarnia, Ontario, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost about $6.00, which of the following sets of CPIs would make the cost in today's dollars the same for both years?

How are the weights on the various goods and services in the CPI basket determined?

Babe Ruth's 1931 salary was $80 000. The price index for 1931 is 15.2 and the price index for 2010 is 195. What would Ruth's 1931 salary be equivalent to in 2010?

Andrew is offered a job in Calgary where the CPI is 120 and a job in Toronto where the CPI is 150. Andrew's job offer in Calgary is for $65 000. Which of the following salaries would the Toronto job have to pay so that both jobs would have the same purchasing power?

Use the table below to answer the following questions. Table 6-2 -Refer to Table 6-2. Suppose that the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the consumer price index for 2011 if the base year is 2010?

What is the purpose of measuring the overall level of prices in the economy?

The price of imported athletic shoes produced by a Canadian company operating in Thailand increases. By itself, what effect will this change have on the Canadian GDP deflator and CPI?

Which of the following prices change when an inflation rate is calculated using the CPI?

What does the CPI measure?

Suppose that Canadian mining companies purchase German-made ore trucks at a reduced price. By itself what will this do to the GDP deflator and the consumer price index?

Why does the GDP deflator give a different rate of inflation than does the CPI?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

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 Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters