Question 1

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

Accepted Answer

A)  the CPI is easier to measure. 
B)  the CPI is calculated more often than the GDP deflator is. 
C)  the CPI better reflects the goods and services bought by consumers. 
D)  the GDP deflator cannot be used to gauge inflation. 
A)  the CPI is easier to measure. 
B)  the CPI is calculated more often than the GDP deflator is. 
C)  the CPI better reflects the goods and services bought by consumers. 
D)  the GDP deflator cannot be used to gauge inflation.

Question 2

David earned a salary of $43,500 in 1994 and $89,000 in 2010. The consumer price index was 148.2 in 1994 and 215.3 in 2010. David's 1994 salary in 2010 dollars is

Accepted Answer

A)  $43,849.05 
B)  $61,263.43 
C)  $63,195.34 
D)  $93,655.50 
A)  $43,849.05 
B)  $61,263.43 
C)  $63,195.34 
D)  $93,655.50

Question 3

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. Which of the following scenarios is consistent with this statement? "The cost of living increased by 25 percent between 2009 and 2011."

Accepted Answer

A)  The price of a hot dog was $2.24 rather than $3.00 in 2009, with other prices in the table remaining fixed. 
B)  The price of a hot dog was $4.07 rather than $3.63 in 2011, with other prices in the table remaining fixed.. 
C)  The price of a hamburger was $4.24 rather than $5.00 in 2009, with other prices in the table remaining fixed. 
D)  The price of a hamburger was $5.96 rather than $5.61 in 2011, with other prices in the table remaining fixed. 
A)  The price of a hot dog was $2.24 rather than $3.00 in 2009, with other prices in the table remaining fixed. 
B)  The price of a hot dog was $4.07 rather than $3.63 in 2011, with other prices in the table remaining fixed.. 
C)  The price of a hamburger was $4.24 rather than $5.00 in 2009, with other prices in the table remaining fixed. 
D)  The price of a hamburger was $5.96 rather than $5.61 in 2011, with other prices in the table remaining fixed.

Question 4

A decrease in the price of domestically produced nuclear reactors 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 5

If the current year CPI is 140, then the price level has increased 40 percent since the base year.

Accepted Answer

A) True 
 B)False

Question 6

In the United States, nominal interest rates were

Accepted Answer

A)  high in the 1970s and 1990s. 
B)  low in the 1970s and 1990s. 
C)  high in the 1970s and low in the 1990s. 
D)  low in the 1970s and high in the 1990s. 
A)  high in the 1970s and 1990s. 
B)  low in the 1970s and 1990s. 
C)  high in the 1970s and low in the 1990s. 
D)  low in the 1970s and high in the 1990s.

Question 7

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 8

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Accepted Answer

A)  The real interest rate is the nominal interest rate times the rate of inflation. 
B)  The real interest rate is the nominal interest rate minus the rate of inflation. 
C)  The real interest rate is the nominal interest rate plus the rate of inflation. 
D)  The real interest rate is the nominal interest rate divided by the rate of inflation. 
A)  The real interest rate is the nominal interest rate times the rate of inflation. 
B)  The real interest rate is the nominal interest rate minus the rate of inflation. 
C)  The real interest rate is the nominal interest rate plus the rate of inflation. 
D)  The real interest rate is the nominal interest rate divided by the rate of inflation.

Question 9

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. If 2012 is the base year, then the CPI for 2013 was

Accepted Answer

A)  95.7. 
B)  100.0. 
C)  104.4. 
D)  110.0. 
A)  95.7. 
B)  100.0. 
C)  104.4. 
D)  110.0.

Question 10

The CPI was 96 in 1982, and the CPI was 230 in 2012. How much money would you have needed in 2012 in order to buy what you could have bought with $500 in 1982?

Accepted Answer

A)  $208.96 
B)  $1,197.92 
C)  $697.92 
D)  $1,697.92 
A)  $208.96 
B)  $1,197.92 
C)  $697.92 
D)  $1,697.92

Question 11

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 CPI

Accepted Answer

A)  increased from 2004 to 2005 and increased from 2005 to 2006. 
B)  increased from 2004 to 2005 and decreased from 2005 to 2006. 
C)  decreased from 2004 to 2005 and increased from 2005 to 2006. 
D)  decreased from 2004 to 2005 and decreased from 2005 to 2006. 
A)  increased from 2004 to 2005 and increased from 2005 to 2006. 
B)  increased from 2004 to 2005 and decreased from 2005 to 2006. 
C)  decreased from 2004 to 2005 and increased from 2005 to 2006. 
D)  decreased from 2004 to 2005 and decreased from 2005 to 2006.

Question 12

The goal of the consumer price index is to measure changes in the

Accepted Answer

A)  costs of production. 
B)  cost of living. 
C)  relative prices of consumer goods. 
D)  production of consumer goods. 
A)  costs of production. 
B)  cost of living. 
C)  relative prices of consumer goods. 
D)  production of consumer goods.

Question 13

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 2011 salary in 1980 dollars?

Accepted Answer

A)  $25,511 
B)  $52,073 
C)  $40,140 
D)  $41,159 
A)  $25,511 
B)  $52,073 
C)  $40,140 
D)  $41,159

Question 14

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Accepted Answer

A)  fails to measure all changes in the quality of goods. 
B)  displays a housing bias. 
C)  accounts for changes in prices of some goods, but prices of certain goods are assumed to remain constant. 
D)  All of the above are correct. 
A)  fails to measure all changes in the quality of goods. 
B)  displays a housing bias. 
C)  accounts for changes in prices of some goods, but prices of certain goods are assumed to remain constant. 
D)  All of the above are correct.

Question 15

Table 24-6
The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.
  
-Refer to Table 24-6. If the base year is 2011, then the economy's inflation rate in 2011 was

Accepted Answer

A)  -5.0 percent. 
B)  -3.3 percent. 
C)  3.3 percent. 
D)  16.0 percent. 
A)  -5.0 percent. 
B)  -3.3 percent. 
C)  3.3 percent. 
D)  16.0 percent.

Question 16

When box office receipts are corrected for inflation, the most popular movie of all time is

Accepted Answer

A)  Star Wars. 
B)  Titanic. 
C)  Gone With the Wind. 
D)  The Sound of Music. 
A)  Star Wars. 
B)  Titanic. 
C)  Gone With the Wind. 
D)  The Sound of Music.

Question 17

Consumer price index =   × 100.

Accepted Answer

A) True 
 B)False

Question 18

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 19

An increase in the price of bread produced domestically 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 20

By keeping the basket of goods and services the same when computing the CPI, the Bureau of Labor Statistics isolates the effects of price changes from the effect of any quantity changes that might be occurring at the same time.

Accepted Answer

A) True 
 B)False

Exam 16: Measuring the Cost of Living

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

David earned a salary of $43,500 in 1994 and $89,000 in 2010. The consumer price index was 148.2 in 1994 and 215.3 in 2010. David's 1994 salary in 2010 dollars is

A decrease in the price of domestically produced nuclear reactors will be reflected in

If the current year CPI is 140, then the price level has increased 40 percent since the base year.

In the United States, nominal interest rates were

The inflation rate is calculated

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

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. If 2012 is the base year, then the CPI for 2013 was

The CPI was 96 in 1982, and the CPI was 230 in 2012. How much money would you have needed in 2012 in order to buy what you could have bought with $500 in 1982?

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 CPI

The goal of the consumer price index is to measure changes in the

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 2011 salary in 1980 dollars?

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. If the base year is 2011, then the economy's inflation rate in 2011 was

When box office receipts are corrected for inflation, the most popular movie of all time is

Consumer price index = × 100.

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?

An increase in the price of bread produced domestically will be reflected in

By keeping the basket of goods and services the same when computing the CPI, the Bureau of Labor Statistics isolates the effects of price changes from the effect of any quantity changes that might be occurring at the same time.

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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