Question 1

The CPI is a measure of the overall cost of

Accepted Answer

A)  the inputs purchased by a typical producer. 
B)  the goods and services purchased by a typical consumer. 
C)  the goods and services produced in the economy. 
D)  the stocks on the New York Stock Exchange. 
A)  the inputs purchased by a typical producer. 
B)  the goods and services purchased by a typical consumer. 
C)  the goods and services produced in the economy. 
D)  the stocks on the New York Stock Exchange.

Question 2

Table 24-14
The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period.
  
-Refer to Table 24-14. Calculate the cost of a basket of goods for each month.

Accepted Answer

110 in January, 93.5

Question 3

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

Accepted Answer

A)  $25.00 purchased in 1975. 
B)  $33.33 purchased in 1975. 
C)  $40.00 purchased in 1975. 
D)  $135.55 purchased in 1975. 
A)  $25.00 purchased in 1975. 
B)  $33.33 purchased in 1975. 
C)  $40.00 purchased in 1975. 
D)  $135.55 purchased in 1975.

Question 4

When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?

Accepted Answer

A)  the quantities of the goods and services purchased 
B)  the prices of the goods and services 
C)  the goods and services making up the basket 
D)  All of the above are correct. 
A)  the quantities of the goods and services purchased 
B)  the prices of the goods and services 
C)  the goods and services making up the basket 
D)  All of the above are correct.

Question 5

The inflation rate is calculated

Accepted Answer

A)  by determining the change in the price index from the preceding period. 
B)  by determining the change in the price index from the base year. 
C)  by determining the percentage change in the price index from the preceding period. 
D)  by determining the percentage change in the price index from the base year. 
A)  by determining the change in the price index from the preceding period. 
B)  by determining the change in the price index from the base year. 
C)  by determining the percentage change in the price index from the preceding period. 
D)  by determining the percentage change in the price index from the base year.

Question 6

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

Accepted Answer

A)  5.6 percent between the first and second years, and 7.7 percent between the second and third years. 
B)  5.9 percent between the first and second years, and 8.3 percent between the second and third years. 
C)  10 percent between the first and second years, and 15 percent between the second and third years. 
D)  80 percent between the first and second years, and 95 percent between the second and third years. 
A)  5.6 percent between the first and second years, and 7.7 percent between the second and third years. 
B)  5.9 percent between the first and second years, and 8.3 percent between the second and third years. 
C)  10 percent between the first and second years, and 15 percent between the second and third years. 
D)  80 percent between the first and second years, and 95 percent between the second and third years.

Question 7

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Accepted Answer

A) True 
 B)False

Question 8

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

Accepted Answer

A)  $39,333.33. 
B)  $74,000.00. 
C)  $89,333.33. 
D)  $63,559.32. 
A)  $39,333.33. 
B)  $74,000.00. 
C)  $89,333.33. 
D)  $63,559.32.

Question 9

The inflation rate is calculated

Accepted Answer

A)  by determining the change in the price index from the preceding period. 
B)  by adding up the price increases of all goods and services. 
C)  by computing a simple average of the price increases for all goods and services. 
D)  by determining the percentage increase in the price index from the preceding period. 
A)  by determining the change in the price index from the preceding period. 
B)  by adding up the price increases of all goods and services. 
C)  by computing a simple average of the price increases for all goods and services. 
D)  by determining the percentage increase in the price index from the preceding period.

Question 10

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 11

The CPI does not reflect the increase in the value of the dollar that arises from the introduction of new goods.

Accepted Answer

A) True 
 B)False

Question 12

Table 24-7. 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.
  
-Refer to Table 24-7. Between 2010 and 2011, the cost of living increased by

Accepted Answer

A)  5.30 percent. 
B)  6.36 percent. 
C)  7.78 percent. 
D)  We need to know the base year in order to answer this question. 
A)  5.30 percent. 
B)  6.36 percent. 
C)  7.78 percent. 
D)  We need to know the base year in order to answer this question.

Question 13

For the purpose of calculating the consumer price index, the basket of goods

Accepted Answer

A)  is kept the same from year to year so that the effects of price changes are isolated from the effect of any quantity changes that might be occurring at the same time. 
B)  is kept the same from year to year; otherwise, the value of the index would remain constant from year to year. 
C)  varies from year to year; otherwise, the value of the index would remain constant from year to year. 
D)  varies from year to year so that consumers' buying patterns are updated in a timely fashion. 
A)  is kept the same from year to year so that the effects of price changes are isolated from the effect of any quantity changes that might be occurring at the same time. 
B)  is kept the same from year to year; otherwise, the value of the index would remain constant from year to year. 
C)  varies from year to year; otherwise, the value of the index would remain constant from year to year. 
D)  varies from year to year so that consumers' buying patterns are updated in a timely fashion.

Question 14

Scenario 24-5
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-5. Using 2010 as the base year, what is the CPI in each year?

Accepted Answer

In 2009 the CPI is 9

Question 15

Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn.
  
-Refer to Table 24-3. If 2013 is the base year, then the CPI for 2013 was

Accepted Answer

A)  75.3. 
B)  100.0. 
C)  116.0. 
D)  132.8. 
A)  75.3. 
B)  100.0. 
C)  116.0. 
D)  132.8.

Question 16

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was

Accepted Answer

A)  100.0. 
B)  100.7. 
C)  83.3. 
D)  84.6. 
A)  100.0. 
B)  100.7. 
C)  83.3. 
D)  84.6.

Question 17

From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education between 2009 and 2010?

Accepted Answer

A)  0.9% 
B)  9.0% 
C)  2.5% 
D)  90% 
A)  0.9% 
B)  9.0% 
C)  2.5% 
D)  90%

Question 18

Table 24-2
The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans.
  
-Refer to Table 24-2. The cost of the basket in 2012 was

Accepted Answer

A)  $200. 
B)  $225. 
C)  $235. 
D)  $212.50. 
A)  $200. 
B)  $225. 
C)  $235. 
D)  $212.50.

Question 19

The CPI differs from the GDP deflator in that

Accepted Answer

A)  the CPI is an inflation index, while the GDP deflator is a price index. 
B)  substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator. 
C)  increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the GDP deflator but not in the CPI. 
D)  increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI. 
A)  the CPI is an inflation index, while the GDP deflator is a price index. 
B)  substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator. 
C)  increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the GDP deflator but not in the CPI. 
D)  increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI.

Question 20

Every unit of good x that is produced in the United States is exported to other countries. An increase in the price of good x shows up

Accepted Answer

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

The CPI is a measure of the overall cost of

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?

The inflation rate is calculated

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

The inflation rate is calculated

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

The CPI does not reflect the increase in the value of the dollar that arises from the introduction of new goods.

Table 24-7. 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. -Refer to Table 24-7. Between 2010 and 2011, the cost of living increased by

For the purpose of calculating the consumer price index, the basket of goods

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. If 2013 is the base year, then the CPI for 2013 was

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was

From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education between 2009 and 2010?

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. The cost of the basket in 2012 was

The CPI differs from the GDP deflator in that

Every unit of good x that is produced in the United States is exported to other countries. An increase in the price of good x shows up

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

The Basic Tools of Finance

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

Six Debates Over Macroeconomic Policy

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Exam 6: Measuring the Cost of Living

The CPI is a measure of the overall cost of

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?

The inflation rate is calculated

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

The inflation rate is calculated

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

The CPI does not reflect the increase in the value of the dollar that arises from the introduction of new goods.

Table 24-7. 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. -Refer to Table 24-7. Between 2010 and 2011, the cost of living increased by

For the purpose of calculating the consumer price index, the basket of goods

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. If 2013 is the base year, then the CPI for 2013 was

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was

From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education between 2009 and 2010?

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. The cost of the basket in 2012 was

The CPI differs from the GDP deflator in that

Every unit of good x that is produced in the United States is exported to other countries. An increase in the price of good x shows up

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

The Basic Tools of Finance

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

Six Debates Over Macroeconomic Policy

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