Question 1

If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?

Accepted Answer

The real i

Question 2

Recent changes in methods used to compute the CPI have made the

Accepted Answer

A)  upward bias in the CPI inflation rate more severe than it used to be. 
B)  upward bias in the CPI inflation rate less severe than it used to be. 
C)  downward bias in the CPI inflation rate more severe than it used to be. 
D)  downward bias in the CPI inflation rate less severe than it used to be. 
A)  upward bias in the CPI inflation rate more severe than it used to be. 
B)  upward bias in the CPI inflation rate less severe than it used to be. 
C)  downward bias in the CPI inflation rate more severe than it used to be. 
D)  downward bias in the CPI inflation rate less severe than it used to be.

Question 3

Michelle bought word-processing software in 2009 for $75. Michelle's cousin, Barry, bought an upgrade of the same software in 2010 for $75. To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

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

Question 4

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.

Accepted Answer

A) True 
 B)False

Question 5

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Accepted Answer

A) True 
 B)False

Question 6

Marion collected Social Security payments of $250 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then her Social Security payments for 1986 should have been

Accepted Answer

A)  $268. 
B)  $292. 
C)  $300. 
D)  $358. 
A)  $268. 
B)  $292. 
C)  $300. 
D)  $358.

Question 7

If the CPI was 127 in 1972 and is 324 today, then $10 in 1972 purchased the same amount of goods and services as

Accepted Answer

A)  $3.92 purchases today. 
B)  $25.51 purchases today. 
C)  $207.00 purchases today. 
D)  $324.00 purchases today. 
A)  $3.92 purchases today. 
B)  $25.51 purchases today. 
C)  $207.00 purchases today. 
D)  $324.00 purchases today.

Question 8

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

Accepted Answer

A)  $37,711.86. 
B)  $49,906.02. 
C)  $66,750.00. 
D)  $112,711.86. 
A)  $37,711.86. 
B)  $49,906.02. 
C)  $66,750.00. 
D)  $112,711.86.

Question 9

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.

Accepted Answer

A) True 
 B)False

Question 10

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation 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 11

Table 24-10
The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats.
  
-Refer to Table 24-10. If 2008 is the base year, then the consumer price index was

Accepted Answer

A)  100.00 in 2008, 110.03 in 2009, and 117.43 in 2010. 
B)  100.00 in 2008, 110.03 in 2009, and 129.20 in 2010. 
C)  100.00 in 2008, 117.00 in 2009, and 132.50 in 2010. 
D)  169.50 in 2008, 186.50 in 2009, and 219.00 in 2010. 
A)  100.00 in 2008, 110.03 in 2009, and 117.43 in 2010. 
B)  100.00 in 2008, 110.03 in 2009, and 129.20 in 2010. 
C)  100.00 in 2008, 117.00 in 2009, and 132.50 in 2010. 
D)  169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.

Question 12

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?

Accepted Answer

A)  $5,400 
B)  $20,466 
C)  $26,158 
D)  $41,159 
A)  $5,400 
B)  $20,466 
C)  $26,158 
D)  $41,159

Question 13

Which of the following is not correct?

Accepted Answer

A)  The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. 
B)  The consumer price index is used to monitor changes in the cost of living over time. 
C)  The consumer price index is used by economists to measure the inflation rate. 
D)  The consumer price index is used to measure the quantity of goods and services that the economy is producing. 
A)  The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. 
B)  The consumer price index is used to monitor changes in the cost of living over time. 
C)  The consumer price index is used by economists to measure the inflation rate. 
D)  The consumer price index is used to measure the quantity of goods and services that the economy is producing.

Question 14

A decrease in the price of domestically produced industrial robots will be reflected in

Accepted Answer

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

Question 15

Suppose the consumer price index was 184 in 2009 and 198.17 in 2010. The nominal interest rate during this period was 5.8 percent. What was the real interest rate during this period?

Accepted Answer

A)  0.4 percent 
B)  1.2 percent 
C)  -1.9 percent 
D)  -2.6 percent 
A)  0.4 percent 
B)  1.2 percent 
C)  -1.9 percent 
D)  -2.6 percent

Question 16

Social Security payments are indexed for inflation using

Accepted Answer

A)  the CPI. 
B)  the PPI. 
C)  the GDP deflator. 
D)  real interest rates. 
A)  the CPI. 
B)  the PPI. 
C)  the GDP deflator. 
D)  real interest rates.

Question 17

Table 24-9
The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period.
  
-Refer to Table 24-9. What is the inflation rate for May?

Accepted Answer

A)  66.4% 
B)  60.1% 
C)  -4.1% 
D)  10% 
A)  66.4% 
B)  60.1% 
C)  -4.1% 
D)  10%

Question 18

Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?

Accepted Answer

A)  $5.39 
B)  $25.00 
C)  $29.11 
D)  $37.11 
A)  $5.39 
B)  $25.00 
C)  $29.11 
D)  $37.11

Question 19

For purposes of calculating the CPI, the apparel category of consumer spending includes the cost of

Accepted Answer

A)  clothing, but not footwear or jewelry. 
B)  clothing and footwear, but not jewelry. 
C)  clothing and jewelry, but not footwear. 
D)  clothing, footwear, and jewelry. 
A)  clothing, but not footwear or jewelry. 
B)  clothing and footwear, but not jewelry. 
C)  clothing and jewelry, but not footwear. 
D)  clothing, footwear, and jewelry.

Question 20

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. The Charlieville salary in Wrexington dollars is

Accepted Answer

A)  $24,000.00. 
B)  $26,666.67. 
C)  $60,000.00 
D)  $66,666.67. 
A)  $24,000.00. 
B)  $26,666.67. 
C)  $60,000.00 
D)  $66,666.67.

If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?

Recent changes in methods used to compute the CPI have made the

Michelle bought word-processing software in 2009 for $75. Michelle's cousin, Barry, bought an upgrade of the same software in 2010 for $75. To which problem in the construction of the CPI is this situation most relevant?

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Marion collected Social Security payments of $250 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then her Social Security payments for 1986 should have been

If the CPI was 127 in 1972 and is 324 today, then $10 in 1972 purchased the same amount of goods and services as

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.

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

Table 24-10 The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats. -Refer to Table 24-10. If 2008 is the base year, then the consumer price index was

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?

Which of the following is not correct?

A decrease in the price of domestically produced industrial robots will be reflected in

Suppose the consumer price index was 184 in 2009 and 198.17 in 2010. The nominal interest rate during this period was 5.8 percent. What was the real interest rate during this period?

Social Security payments are indexed for inflation using

Table 24-9 The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. -Refer to Table 24-9. What is the inflation rate for May?

Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?

For purposes of calculating the CPI, the apparel category of consumer spending includes the cost of

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 8.3% and the inflation rate is 4.4%, what is the real interest rate?

Recent changes in methods used to compute the CPI have made the

Michelle bought word-processing software in 2009 for $75. Michelle's cousin, Barry, bought an upgrade of the same software in 2010 for $75. To which problem in the construction of the CPI is this situation most relevant?

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Marion collected Social Security payments of $250 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then her Social Security payments for 1986 should have been

If the CPI was 127 in 1972 and is 324 today, then $10 in 1972 purchased the same amount of goods and services as

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.

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

Table 24-10 The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats. -Refer to Table 24-10. If 2008 is the base year, then the consumer price index was

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?

Which of the following is not correct?

A decrease in the price of domestically produced industrial robots will be reflected in

Suppose the consumer price index was 184 in 2009 and 198.17 in 2010. The nominal interest rate during this period was 5.8 percent. What was the real interest rate during this period?

Social Security payments are indexed for inflation using

Table 24-9 The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. -Refer to Table 24-9. What is the inflation rate for May?

Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?

For purposes of calculating the CPI, the apparel category of consumer spending includes the cost of

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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