Question 1

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Accepted Answer

A) True 
 B)False

Question 2

Table 24-4
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 24-4. The inflation rate was

Accepted Answer

A)  24.3 percent in 2013 and 22.5 percent in 2014. 
B)  23.8 percent in 2013 and 9.5 percent in 2014. 
C)  23.8 percent in 2013 and 7.7 percent in 2014. 
D)  24.3 percent in 2013 and 7.3 percent in 2014. 
A)  24.3 percent in 2013 and 22.5 percent in 2014. 
B)  23.8 percent in 2013 and 9.5 percent in 2014. 
C)  23.8 percent in 2013 and 7.7 percent in 2014. 
D)  24.3 percent in 2013 and 7.3 percent in 2014.

Question 3

The nominal interest rate tells you

Accepted Answer

A)  how fast the number of dollars in your bank account rises over time. 
B)  how fast the purchasing power of your bank account rises over time. 
C)  the number of dollars in your bank account today. 
D)  the purchasing power of your bank account today. 
A)  how fast the number of dollars in your bank account rises over time. 
B)  how fast the purchasing power of your bank account rises over time. 
C)  the number of dollars in your bank account today. 
D)  the purchasing power of your bank account today.

Question 4

Inflation can be measured using either the GDP deflator or the consumer price index.

Accepted Answer

A) True 
 B)False

Question 5

The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

Accepted Answer

A) True 
 B)False

Question 6

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Accepted Answer

A)  Sophia will have 3 percent more money, which will purchase 5 percent more goods. 
B)  Sophia will have 3 percent more money, which will purchase 7 percent more goods. 
C)  Sophia will have 5 percent more money, which will purchase 3 percent more goods. 
D)  Sophia will have 5 percent more money, which will purchase 7 percent more goods. 
A)  Sophia will have 3 percent more money, which will purchase 5 percent more goods. 
B)  Sophia will have 3 percent more money, which will purchase 7 percent more goods. 
C)  Sophia will have 5 percent more money, which will purchase 3 percent more goods. 
D)  Sophia will have 5 percent more money, which will purchase 7 percent more goods.

Question 7

Table 24-4
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 24-4. If 2014 is the base year, then the consumer price index was

Accepted Answer

A)  75 in 2012, 92.8 in 2013, and 100 in 2014. 
B)  75 in 2012, 93.2 in 2013, and 100 in 2014. 
C)  247.5 in 2012, 307.5 in 2013, and 330 in 2014. 
D)  210 in 2012, 260 in 2013, and 280 in 2014. 
A)  75 in 2012, 92.8 in 2013, and 100 in 2014. 
B)  75 in 2012, 93.2 in 2013, and 100 in 2014. 
C)  247.5 in 2012, 307.5 in 2013, and 330 in 2014. 
D)  210 in 2012, 260 in 2013, and 280 in 2014.

Question 8

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was

Accepted Answer

A)  112.5 and the inflation rate was 12.5%. 
B)  112.5 and the inflation rate was 4.6%. 
C)  104.6 and the inflation rate was 4.6%. 
D)  104.6 and the inflation rate was 12.5%. 
A)  112.5 and the inflation rate was 12.5%. 
B)  112.5 and the inflation rate was 4.6%. 
C)  104.6 and the inflation rate was 4.6%. 
D)  104.6 and the inflation rate was 12.5%.

Question 9

Table 24-1
The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year.
  
-Refer to Table 24-1. What belongs in space C?

Accepted Answer

A)  120 
B)  25% 
C)  8.7% 
D)  12% 
A)  120 
B)  25% 
C)  8.7% 
D)  12%

Question 10

Which of the following is not correct?

Accepted Answer

A)  The U.S. economy has never experienced deflation. 
B)  Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate. 
C)  Since 1965, the U.S. economy has experienced rising consumer prices in most years. 
D)  During deflation, the real interest rate exceeds the nominal interest rate. 
A)  The U.S. economy has never experienced deflation. 
B)  Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate. 
C)  Since 1965, the U.S. economy has experienced rising consumer prices in most years. 
D)  During deflation, the real interest rate exceeds the nominal interest rate.

Question 11

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as

Accepted Answer

A)  $2.67 purchases today. 
B)  $37.50 purchases today. 
C)  $39.00 purchases today. 
D)  $104.00 purchases today. 
A)  $2.67 purchases today. 
B)  $37.50 purchases today. 
C)  $39.00 purchases today. 
D)  $104.00 purchases today.

Question 12

Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causes inventors to look at alternative sources of fuel for internal-combustion engines. A hydrogen-powered engine is developed which is cheaper to operate than gasoline engines. Which problems in the construction of the CPI does this situation represent?

Accepted Answer

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

Question 13

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 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 12 percent.

Accepted Answer

A) True 
 B)False

Question 14

If 2012 is the base year, then the inflation rate for 2012 equals

Accepted Answer

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

Question 15

Scenario 24-4
Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90.
-Refer to Scenario 24-4. If Quinn only cares about maximizing her purchasing power, then she should

Accepted Answer

A)  take the Charlieville job. 
B)  take the Wrexington job. 
C)  take either job because they both have the same purchasing power. 
D)  The answer cannot be determined from the information given because a salary is not the same as purchasing power. 
A)  take the Charlieville job. 
B)  take the Wrexington job. 
C)  take either job because they both have the same purchasing power. 
D)  The answer cannot be determined from the information given because a salary is not the same as purchasing power.

Question 16

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Accepted Answer

A) True 
 B)False

Question 17

If 2010 is the base year, then the inflation rate in 2015 equals

Accepted Answer

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

Question 18

In 1972, 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 $6.00, then which pair 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)  75 in 1972 and 160 today 
D)  90 in 1972 and 145.8 today 
A)  60 in 1972 and 150 today 
B)  65 in 1972 and 156 today 
C)  75 in 1972 and 160 today 
D)  90 in 1972 and 145.8 today

Question 19

Price changes from year to year are not proportional, and consumers respond to these changes by altering their spending patterns. The problem this creates for inflation calculations is called

Accepted Answer

A)  deflation. 
B)  inflation. 
C)  unmeasured quality change. 
D)  substitution bias. 
A)  deflation. 
B)  inflation. 
C)  unmeasured quality change. 
D)  substitution bias.

Question 20

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. The cost of the basket in 2012 was

Accepted Answer

A)  $108. 
B)  $116. 
C)  $112. 
D)  $224. 
A)  $108. 
B)  $116. 
C)  $112. 
D)  $224.

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Table 24-4 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 24-4. The inflation rate was

The nominal interest rate tells you

Inflation can be measured using either the GDP deflator or the consumer price index.

The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Table 24-4 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 24-4. If 2014 is the base year, then the consumer price index was

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was

Table 24-1 The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year. -Refer to Table 24-1. What belongs in space C?

Which of the following is not correct?

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as

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 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 12 percent.

If 2012 is the base year, then the inflation rate for 2012 equals

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

If 2010 is the base year, then the inflation rate in 2015 equals

In 1972, 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 $6.00, then which pair of CPIs would make the cost in today's dollars the same for both years?

Price changes from year to year are not proportional, and consumers respond to these changes by altering their spending patterns. The problem this creates for inflation calculations is called

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. The cost of the basket in 2012 was

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

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Table 24-4 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 24-4. The inflation rate was

The nominal interest rate tells you

Inflation can be measured using either the GDP deflator or the consumer price index.

The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Table 24-4 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 24-4. If 2014 is the base year, then the consumer price index was

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was

Table 24-1 The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year. -Refer to Table 24-1. What belongs in space C?

Which of the following is not correct?

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as

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 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 12 percent.

If 2012 is the base year, then the inflation rate for 2012 equals

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

If 2010 is the base year, then the inflation rate in 2015 equals

In 1972, 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 $6.00, then which pair of CPIs would make the cost in today's dollars the same for both years?

Price changes from year to year are not proportional, and consumers respond to these changes by altering their spending patterns. The problem this creates for inflation calculations is called

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. The cost of the basket in 2012 was

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