Question 1

Which of the following is the correct formula for calculating the consumer price index?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 2

The inflation rate for 2007 is computed by dividing the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is the correct formula for calculating the inflation rate?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 4

Table 24-11. Megan's salary for three consecutive years, along with other values, are presented in the table below.
  
-Refer to Table 24-11. Suppose the consumer price index for 2013 is not necessarily 235. Then Megan's 2013 salary represents more purchasing power than her 2011 salary as long as the consumer price index for 2013 is

Accepted Answer

A)  greater than 264.25. 
B)  less than 264.25. 
C)  greater than 258.71. 
D)  less than 258.71. 
A)  greater than 264.25. 
B)  less than 264.25. 
C)  greater than 258.71. 
D)  less than 258.71.

Question 5

If the nominal interest rate is 4.2 percent and the rate of inflation is -0.5 percent, then the real interest rate is

Accepted Answer

A)  -8.4 percent. 
B)  -2.1 percent. 
C)  3.7 percent. 
D)  4.7 percent. 
A)  -8.4 percent. 
B)  -2.1 percent. 
C)  3.7 percent. 
D)  4.7 percent.

Question 6

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 7

The consumer price index is subject to substitution bias because

Accepted Answer

A)  some pairs of goods are complements rather than substitutes. 
B)  some goods are inferior rather than normal. 
C)  the law of demand applies to most, if not all, goods. 
D)  the index does not take into account the likelihood that consumers substitute newly-introduced goods for more- established goods. 
A)  some pairs of goods are complements rather than substitutes. 
B)  some goods are inferior rather than normal. 
C)  the law of demand applies to most, if not all, goods. 
D)  the index does not take into account the likelihood that consumers substitute newly-introduced goods for more- established goods.

Question 8

When the relative price of a good increases, consumers respond by buying

Accepted Answer

A)  a larger quantity of that good and a larger quantity of substitutes for that good. 
B)  a larger quantity of that good and a smaller quantity of substitutes for that good. 
C)  a smaller quantity of that good and a larger quantity of substitutes for that good. 
D)  a smaller quantity of that good and a smaller quantity of substitutes for that good. 
A)  a larger quantity of that good and a larger quantity of substitutes for that good. 
B)  a larger quantity of that good and a smaller quantity of substitutes for that good. 
C)  a smaller quantity of that good and a larger quantity of substitutes for that good. 
D)  a smaller quantity of that good and a smaller quantity of substitutes for that good.

Question 9

When box office receipts are not corrected for inflation, the most popular movie of all time is

Accepted Answer

A)  Star Wars. 
B)  Avatar. 
C)  Gone With the Wind. 
D)  The Dark Knight. 
A)  Star Wars. 
B)  Avatar. 
C)  Gone With the Wind. 
D)  The Dark Knight.

Question 10

If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was

Accepted Answer

A)  1.06 percent. 
B)  6 percent. 
C)  10.6 percent. 
D)  106 percent. 
A)  1.06 percent. 
B)  6 percent. 
C)  10.6 percent. 
D)  106 percent.

Question 11

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

Accepted Answer

A)  increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
B)  increases, so the CPI understates the change in the cost of living if the quality change is not accounted for. 
C)  decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
D)  decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for. 
A)  increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
B)  increases, so the CPI understates the change in the cost of living if the quality change is not accounted for. 
C)  decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
D)  decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.

Question 12

If the nominal interest rate is 9 percent and the real interest rate is 3 percent, then the inflation rate is

Accepted Answer

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

Question 13

A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods. BLS attempts to account for this change in the market basket by

Accepted Answer

A)  dropping the good from the basket. 
B)  substituting in a different vehicle with the same horsepower as the 2008 model. 
C)  adjusting the share of the market basket allocated to transportation. 
D)  adjusting the price of the good to account for the quality change. 
A)  dropping the good from the basket. 
B)  substituting in a different vehicle with the same horsepower as the 2008 model. 
C)  adjusting the share of the market basket allocated to transportation. 
D)  adjusting the price of the good to account for the quality change.

Question 14

In addition to the consumer price index, the Bureau of Labor Statistics also calculates the

Accepted Answer

A)  macroeconomic price index. 
B)  producer price index. 
C)  rental unit price index. 
D)  terms of trade. 
A)  macroeconomic price index. 
B)  producer price index. 
C)  rental unit price index. 
D)  terms of trade.

Question 15

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 16

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below.
  
-Refer to Table 24-12. Suppose Will's 2009 food expenditures in 2011 dollars amounted to $5,670. Suppose also that the real interest rate in 2011 was 3 percent. Then, in 2011,

Accepted Answer

A)  the inflation rate was 8 percent and the nominal interest rate was 5 percent. 
B)  the inflation rate was 9 percent and the nominal interest rate was 6 percent. 
C)  the inflation rate was 8 percent and the nominal interest rate was 11 percent. 
D)  the inflation rate was 9 percent and the nominal interest rate was 12 percent. 
A)  the inflation rate was 8 percent and the nominal interest rate was 5 percent. 
B)  the inflation rate was 9 percent and the nominal interest rate was 6 percent. 
C)  the inflation rate was 8 percent and the nominal interest rate was 11 percent. 
D)  the inflation rate was 9 percent and the nominal interest rate was 12 percent.

Question 17

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.

Accepted Answer

A) True 
 B)False

Question 18

Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys.
  
-Refer to Table 24-5. If the base year is 2004, then the inflation rate in 2006 was

Accepted Answer

A)  44.4%. 
B)  50%. 
C)  62.5%. 
D)  80%. 
A)  44.4%. 
B)  50%. 
C)  62.5%. 
D)  80%.

Question 19

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 20

If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent, then the real interest rate is

Accepted Answer

A)  -7.5 percent. 
B)  -2.5 percent. 
C)  2.5 percent. 
D)  7.5 percent. 
A)  -7.5 percent. 
B)  -2.5 percent. 
C)  2.5 percent. 
D)  7.5 percent.

Which of the following is the correct formula for calculating the consumer price index?

The inflation rate for 2007 is computed by dividing the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.

Which of the following is the correct formula for calculating the inflation rate?

If the nominal interest rate is 4.2 percent and the rate of inflation is -0.5 percent, then the real interest rate is

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

The consumer price index is subject to substitution bias because

When the relative price of a good increases, consumers respond by buying

When box office receipts are not corrected for inflation, the most popular movie of all time is

If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

If the nominal interest rate is 9 percent and the real interest rate is 3 percent, then the inflation rate is

A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods. BLS attempts to account for this change in the market basket by

In addition to the consumer price index, the Bureau of Labor Statistics also calculates the

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

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. If the base year is 2004, then the inflation rate in 2006 was

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

If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent, then the real interest rate is

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

Which of the following is the correct formula for calculating the consumer price index?

The inflation rate for 2007 is computed by dividing the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.

Which of the following is the correct formula for calculating the inflation rate?

If the nominal interest rate is 4.2 percent and the rate of inflation is -0.5 percent, then the real interest rate is

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

The consumer price index is subject to substitution bias because

When the relative price of a good increases, consumers respond by buying

When box office receipts are not corrected for inflation, the most popular movie of all time is

If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

If the nominal interest rate is 9 percent and the real interest rate is 3 percent, then the inflation rate is

A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods. BLS attempts to account for this change in the market basket by

In addition to the consumer price index, the Bureau of Labor Statistics also calculates the

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

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. If the base year is 2004, then the inflation rate in 2006 was

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

If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent, then the real interest rate is

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

Filters