Question 1

If 2004 is the base year,then the inflation rate for 2005 equals
A)
B)
C)
D)

Accepted Answer

The answer of If 2004 is the base year,then the...

Question 2

Suppose the price of a gallon of ice cream rises from $4 to $5 and the price of a can of coffee rises from $2 to $2.50.If the CPI rises from 150 to 200,then people likely will buy

Accepted Answer

A)  more ice cream and more coffee. 
B)  more ice cream and less coffee. 
C)  less ice cream and more coffee. 
D)  less ice cream and less coffee. 
A)  more ice cream and more coffee. 
B)  more ice cream and less coffee. 
C)  less ice cream and more coffee. 
D)  less ice cream and less coffee.

Question 3

In the basket of goods that is used to compute the consumer price index,the three largest categories of consumer spending are

Accepted Answer

A)  housing,transportation,and recreation. 
B)  housing,transportation,and food & beverages. 
C)  housing,food & beverages,and education & communication. 
D)  housing,medical care,and education & communication. 
A)  housing,transportation,and recreation. 
B)  housing,transportation,and food & beverages. 
C)  housing,food & beverages,and education & communication. 
D)  housing,medical care,and education & communication.

Question 4

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players,we find that the current median salary of today's Yankees is

Accepted Answer

A)  about three quarters of Ruth's salary. 
B)  about the same as Ruth's salary. 
C)  about twice Ruth's salary. 
D)  more than four times Ruth's salary. 
A)  about three quarters of Ruth's salary. 
B)  about the same as Ruth's salary. 
C)  about twice Ruth's salary. 
D)  more than four times Ruth's salary.

Question 5

Which of the following statements about real and nominal interest rates is correct?

Accepted Answer

A)  Real interest rates can be either positive or negative,but nominal interest rates must be positive. 
B)  Real interest rates and nominal interest rates must be positive. 
C)  Real interest rates must be positive,but nominal interest rates can be either positive or negative. 
D)  Real interest rates and nominal interest rates can be either positive or negative. 
A)  Real interest rates can be either positive or negative,but nominal interest rates must be positive. 
B)  Real interest rates and nominal interest rates must be positive. 
C)  Real interest rates must be positive,but nominal interest rates can be either positive or negative. 
D)  Real interest rates and nominal interest rates can be either positive or negative.

Question 6

From 2004 to 2005,the CPI for medical care increased from 260.8 to 272.8.What was the inflation rate for medical care?

Accepted Answer

A)  4.4 percent 
B)  4.6 percent 
C)  12.0 percent 
D)  172.8 percent 
A)  4.4 percent 
B)  4.6 percent 
C)  12.0 percent 
D)  172.8 percent

Question 7

In 1972,one could buy model rocket engines for $1.50 each.If those same engines cost $2.50 each today,then which pair of CPIs would make the engine prices in today's dollars the same for both years?

Accepted Answer

A)  60 in 1972 and 95 today 
B)  60 in 1972 and 120 today 
C)  90 in 1972 and 140 today 
D)  96 in 1972 and 160 today 
A)  60 in 1972 and 95 today 
B)  60 in 1972 and 120 today 
C)  90 in 1972 and 140 today 
D)  96 in 1972 and 160 today

Question 8

Arlo is offered a job in Des Moines,where the CPI is 80,and a job in New York,where the CPI is 125.Arlo's job offer in Des Moines is for $42,000.How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Accepted Answer

A)  $42,000 
B)  $65,625 
C)  $68,880 
D)  $189,000 
A)  $42,000 
B)  $65,625 
C)  $68,880 
D)  $189,000

Question 9

Consider a small economy in which consumers buy only two goods: apples and pears.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

Accepted Answer

A)  the number of apples bought by the typical consumer is equal to the number of pears bought by the typical consumer in each year. 
B)  neither the number of apples nor the number of pears bought by the typical consumer changes from year to year. 
C)  the percentage change in the price of apples is equal to the percentage change in the price of pears from year to year. 
D)  neither the price of apples nor the price of pears changes from year to year. 
A)  the number of apples bought by the typical consumer is equal to the number of pears bought by the typical consumer in each year. 
B)  neither the number of apples nor the number of pears bought by the typical consumer changes from year to year. 
C)  the percentage change in the price of apples is equal to the percentage change in the price of pears from year to year. 
D)  neither the price of apples nor the price of pears changes from year to year.

Question 10

Suppose that over the past year,the real interest rate was 6 percent and the inflation rate was 4 percent.It follows that

Accepted Answer

A)  the dollar value of savings increased at 6 percent,and the purchasing power of savings increased at 2 percent. 
B)  the dollar value of savings increased at 6 percent,and the purchasing power of savings increased at 10 percent. 
C)  the dollar value of savings increased at 10 percent,and the purchasing power of savings increased at 2 percent. 
D)  the dollar value of savings increased at 10 percent,and the purchasing power of savings increased at 6 percent. 
A)  the dollar value of savings increased at 6 percent,and the purchasing power of savings increased at 2 percent. 
B)  the dollar value of savings increased at 6 percent,and the purchasing power of savings increased at 10 percent. 
C)  the dollar value of savings increased at 10 percent,and the purchasing power of savings increased at 2 percent. 
D)  the dollar value of savings increased at 10 percent,and the purchasing power of savings increased at 6 percent.

Question 11

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 12

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent,then the inflation rate is

Accepted Answer

A)  -2.5 percent. 
B)  0.45 percent. 
C)  2.5 percent. 
D)  13.5 percent. 
A)  -2.5 percent. 
B)  0.45 percent. 
C)  2.5 percent. 
D)  13.5 percent.

Question 13

Which entity within the U.S.government is responsible for computing and reporting the CPI?

Accepted Answer

A)  the Department of Commerce 
B)  the Department of Labor 
C)  the General Accounting Office 
D)  the Council of Economic Advisers 
A)  the Department of Commerce 
B)  the Department of Labor 
C)  the General Accounting Office 
D)  the Council of Economic Advisers

Question 14

Suppose a basket of goods and services has been selected to calculate the CPI and 2004 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 $54.60.The value of the CPI in 2006 was

Accepted Answer

A)  91.6. 
B)  95.2. 
C)  105.0. 
D)  109.2. 
A)  91.6. 
B)  95.2. 
C)  105.0. 
D)  109.2.

Question 15

If the cost of medical care increases by 50 percent,then,other things the same,the CPI is likely to increase by about

Accepted Answer

A)  3 percent. 
B)  6 percent. 
C)  12 percent. 
D)  50 percent. 
A)  3 percent. 
B)  6 percent. 
C)  12 percent. 
D)  50 percent.

Question 16

Table 24-3
The table below pertains to Studious,an economy in which the typical consumer's basket consists of 5 books and 10 calculators.
  
-Refer to Table 24-3.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 17

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 18

Suppose the CPI was 108 in 1967,and suppose one must spend $936 today to obtain the same basket of goods and services that could be bought for $200 in 1967.Then today's CPI is

Accepted Answer

A)  116.67. 
B)  131.08. 
C)  397.44. 
D)  505.44. 
A)  116.67. 
B)  131.08. 
C)  397.44. 
D)  505.44.

Question 19

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

Accepted Answer

The GDP deflator and the CPI differ in t

Question 20

Many economists believe the bias in the CPI is now only about half as large as it once was.

Accepted Answer

A) True 
 B)False

Exam 24: Measuring the Cost of Living

If 2004 is the base year,then the inflation rate for 2005 equals A) B) C) D)

Suppose the price of a gallon of ice cream rises from $4 to $5 and the price of a can of coffee rises from $2 to $2.50.If the CPI rises from 150 to 200,then people likely will buy

In the basket of goods that is used to compute the consumer price index,the three largest categories of consumer spending are

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players,we find that the current median salary of today's Yankees is

Which of the following statements about real and nominal interest rates is correct?

From 2004 to 2005,the CPI for medical care increased from 260.8 to 272.8.What was the inflation rate for medical care?

In 1972,one could buy model rocket engines for $1.50 each.If those same engines cost $2.50 each today,then which pair of CPIs would make the engine prices in today's dollars the same for both years?

Arlo is offered a job in Des Moines,where the CPI is 80,and a job in New York,where the CPI is 125.Arlo's job offer in Des Moines is for $42,000.How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Consider a small economy in which consumers buy only two goods: apples and pears.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

Suppose that over the past year,the real interest rate was 6 percent and the inflation rate was 4 percent.It follows that

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

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent,then the inflation rate is

Which entity within the U.S.government is responsible for computing and reporting the CPI?

Suppose a basket of goods and services has been selected to calculate the CPI and 2004 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 $54.60.The value of the CPI in 2006 was

If the cost of medical care increases by 50 percent,then,other things the same,the CPI is likely to increase by about

Table 24-3 The table below pertains to Studious,an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 24-3.If 2006 is the base year,then the consumer price index was

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?

Suppose the CPI was 108 in 1967,and suppose one must spend $936 today to obtain the same basket of goods and services that could be bought for $200 in 1967.Then today's CPI is

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

Many economists believe the bias in the CPI is now only about half as large as it once was.

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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 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 Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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