Question 1

Consumer spending in what category is the largest component of the CPI?

Accepted Answer

The answer of Consumer spending in what category is the...

Question 2

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 3

The real interest rate measures the change in dollar amounts.

Accepted Answer

A) True 
 B)False

Question 4

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 consumer price index for May?

Accepted Answer

A)  60 
B)  132 
C)  166 
D)  123 
A)  60 
B)  132 
C)  166 
D)  123

Question 5

Suppose Stan Musial earned $115,000 in 1947. If the CPI was 82 in 1947, and was 246 in 1990, what is Stan Musial's 1947 salary in 1990 dollars?

Accepted Answer

Stan Musial's 1947 s

Question 6

In 1986, Ken bought a Ford Mustang for $8,000. If the price index was 122 in 1986 and the price index was 280 in 2011, then what is the price of the Mustang in 2011 dollars?

Accepted Answer

A)  $3,485.71 
B)  $8,100.71 
C)  $18,360.66 
D)  $22,400.00 
A)  $3,485.71 
B)  $8,100.71 
C)  $18,360.66 
D)  $22,400.00

Question 7

Changes in the consumer price index are useful in predicting changes in the producer price index.

Accepted Answer

A) True 
 B)False

Question 8

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

Accepted Answer

A)  $35,000.00. 
B)  $46,666.67. 
C)  $61,950.00 
D)  $105,000.00. 
A)  $35,000.00. 
B)  $46,666.67. 
C)  $61,950.00 
D)  $105,000.00.

Question 9

The CPI is a measure of the overall cost of the goods and services bought by

Accepted Answer

A)  a typical firm. 
B)  the government. 
C)  a typical consumer. 
D)  All of the above are correct. 
A)  a typical firm. 
B)  the government. 
C)  a typical consumer. 
D)  All of the above are correct.

Question 10

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 2012 is the base year, then the CPI for 2012 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 11

Suppose the price for one gallon of gasoline rises from $3.50 to $4.00 and the price of one gallon of milk rises from $3.00 to $3.20. If the CPI rises from 120 to 132, then people likely will buy

Accepted Answer

A)  more gasoline and more milk. 
B)  more gasoline and fewer milk. 
C)  less gasoline and more milk. 
D)  less gasoline and fewer milk. 
A)  more gasoline and more milk. 
B)  more gasoline and fewer milk. 
C)  less gasoline and more milk. 
D)  less gasoline and fewer milk.

Question 12

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 13

If the nominal interest rate is 5 percent, and the rate of inflation is 3 percent, then the real interest rate is equal to

Accepted Answer

A)  2 percent. 
B)  0.6 percent. 
C)  1.7 percent. 
D)  15 percent. 
A)  2 percent. 
B)  0.6 percent. 
C)  1.7 percent. 
D)  15 percent.

Question 14

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 15

Suppose the quality of televisions changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be most severe?

Accepted Answer

A)  The quality of televisions deteriorates and televisions become more expensive relative to other goods. 
B)  The quality of televisions improves and televisions become less expensive relative to other goods. 
C)  The quality of televisions improves and televisions become more expensive relative to other goods. 
D)  The quality of televisions deteriorates and the price of televisions relative to other prices remains unchanged. 
A)  The quality of televisions deteriorates and televisions become more expensive relative to other goods. 
B)  The quality of televisions improves and televisions become less expensive relative to other goods. 
C)  The quality of televisions improves and televisions become more expensive relative to other goods. 
D)  The quality of televisions deteriorates and the price of televisions relative to other prices remains unchanged.

Question 16

In the calculation of the CPI, tea is given greater weight than beer if

Accepted Answer

A)  the price of tea is higher than the price of beer. 
B)  it costs more to produce tea than it costs to produce beer. 
C)  tea is more readily available than beer to the typical consumer. 
D)  consumers buy more tea than beer. 
A)  the price of tea is higher than the price of beer. 
B)  it costs more to produce tea than it costs to produce beer. 
C)  tea is more readily available than beer to the typical consumer. 
D)  consumers buy more tea than beer.

Question 17

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is correct?

Accepted Answer

A)  The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers. 
B)  The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers. 
C)  The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers. 
D)  The GDP deflator is more commonly used as a gauge of inflation than the CPI is. 
A)  The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers. 
B)  The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers. 
C)  The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers. 
D)  The GDP deflator is more commonly used as a gauge of inflation than the CPI is.

Question 19

The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?

Accepted Answer

A)  1.04 percent 
B)  4.41 percent 
C)  6.00 percent 
D)  42.00 percent 
A)  1.04 percent 
B)  4.41 percent 
C)  6.00 percent 
D)  42.00 percent

Question 20

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.

Exam 16: Measuring the Cost of Living

Consumer spending in what category is the largest component of the CPI?

The CPI is a measure of the overall cost of

The real interest rate measures the change in dollar amounts.

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 consumer price index for May?

Suppose Stan Musial earned $115,000 in 1947. If the CPI was 82 in 1947, and was 246 in 1990, what is Stan Musial's 1947 salary in 1990 dollars?

In 1986, Ken bought a Ford Mustang for $8,000. If the price index was 122 in 1986 and the price index was 280 in 2011, then what is the price of the Mustang in 2011 dollars?

Changes in the consumer price index are useful in predicting changes in the producer price index.

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

The CPI is a measure of the overall cost of the goods and services bought by

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 2012 is the base year, then the CPI for 2012 was

Suppose the price for one gallon of gasoline rises from $3.50 to $4.00 and the price of one gallon of milk rises from $3.00 to $3.20. If the CPI rises from 120 to 132, then people likely will buy

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 5 percent, and the rate of inflation is 3 percent, then the real interest rate is equal to

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

Suppose the quality of televisions changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be most severe?

In the calculation of the CPI, tea is given greater weight than beer if

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

Which of the following is correct?

The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?

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

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 Costs of Production

Firms in Competitive Markets

Monopoly

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

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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