Question 1

Reports on the current consumer price index are released every

Accepted Answer

A)  quarter. 
B)  two weeks. 
C)  month. 
D)  week. 
A)  quarter. 
B)  two weeks. 
C)  month. 
D)  week.

Question 2

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 amount to $5,750. Then x, the consumer price index for 2011, has a value of

Accepted Answer

A)  184.0. 
B)  185.8. 
C)  187.5. 
D)  189.4. 
A)  184.0. 
B)  185.8. 
C)  187.5. 
D)  189.4.

Question 3

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that

Accepted Answer

A)  the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 3 percent. 
B)  the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 4 percent. 
C)  the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 2 percent. 
D)  the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 3 percent. 
A)  the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 3 percent. 
B)  the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 4 percent. 
C)  the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 2 percent. 
D)  the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 3 percent.

Question 4

Table 24-15
The table below lists the prices of chips and salsa for the months of October, November, and December. Assume that the typical consumer buys 8 bags of chips and 4 jars of salsa each month, and that October is the base period.
  
-Refer to Table 24-15. Calculate the inflation rate for November.

Accepted Answer

The answer of Table 24-15
The table below lists the prices...

Question 5

Which of the following changes in the price index produces the greatest rate of inflation: 100 to 110, 150 to 165, or 180 to 198?

Accepted Answer

A)  100 to 110 
B)  150 to 165 
C)  180 to 198 
D)  All of these changes produce the same rate of inflation. 
A)  100 to 110 
B)  150 to 165 
C)  180 to 198 
D)  All of these changes produce the same rate of inflation.

Question 6

There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

Accepted Answer

A) True 
 B)False

Question 7

Table 24-8
The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers.
  
-Refer to Table 24-8. If the base year is 2013, then the consumer price index was

Accepted Answer

A)  80 in 2013, 100 in 2014, and 60 in 2015. 
B)  100 in 2013, 300 in 2014, and -100 in 2015. 
C)  180 in 2013, 200 in 2014, and 160 in 2015. 
D)  100 in 2013, 111.1 in 2014, and 88.9 in 2015. 
A)  80 in 2013, 100 in 2014, and 60 in 2015. 
B)  100 in 2013, 300 in 2014, and -100 in 2015. 
C)  180 in 2013, 200 in 2014, and 160 in 2015. 
D)  100 in 2013, 111.1 in 2014, and 88.9 in 2015.

Question 8

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates. From this you conclude

Accepted Answer

A)  there were serious episodes of deflation in the time frame represented on the graph. 
B)  consumer prices were always rising in the time frame represented on the graph. 
C)  the economy never experienced a recession in the time frame represented on the graph. 
D)  GDP was always increasing for the time frame represented on the graph. 
A)  there were serious episodes of deflation in the time frame represented on the graph. 
B)  consumer prices were always rising in the time frame represented on the graph. 
C)  the economy never experienced a recession in the time frame represented on the graph. 
D)  GDP was always increasing for the time frame represented on the graph.

Question 9

In an imaginary economy, consumers buy only hot dogs and hamburgers. The fixed basket consists of 10 hot dogs and 6 hamburgers. A hot dog cost $3 in 2006 and $5.40 in 2007. A hamburger cost $5 in 2006 and $6 in 2007. Which of the following statements is correct?

Accepted Answer

A)  When 2006 is chosen as the base year, the consumer price index is 90 in 2007. 
B)  When 2006 is chosen as the base year, the inflation rate is 150 percent in 2007. 
C)  When 2007 is chosen as the base year, the consumer price index is 100 in 2006. 
D)  When 2007 is chosen as the base year, the inflation rate is 50 percent in 2007. 
A)  When 2006 is chosen as the base year, the consumer price index is 90 in 2007. 
B)  When 2006 is chosen as the base year, the inflation rate is 150 percent in 2007. 
C)  When 2007 is chosen as the base year, the consumer price index is 100 in 2006. 
D)  When 2007 is chosen as the base year, the inflation rate is 50 percent in 2007.

Question 10

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 11

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

Accepted Answer

A)  $3.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. 
B)  $3.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars. 
C)  $4.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. 
D)  $4.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars. 
A)  $3.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. 
B)  $3.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars. 
C)  $4.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. 
D)  $4.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.

Question 12

What measure reflects the overall cost of goods and services produced domestically?

Accepted Answer

The answer of What measure reflects the overall cost of...

Question 13

In general, if a consumer good is produced domestically and consumed domestically, a decrease in its price will have which of the following effects?

Accepted Answer

A)  The consumer price index will decrease relatively more than will the GDP deflator. 
B)  The consumer price index and the GDP deflator will decrease by the same amount. 
C)  The consumer price index will decrease relatively less than will the GDP deflator. 
D)  One cannot generalize about the decrease in the consumer price index relative to the decrease in the GDP deflator. 
A)  The consumer price index will decrease relatively more than will the GDP deflator. 
B)  The consumer price index and the GDP deflator will decrease by the same amount. 
C)  The consumer price index will decrease relatively less than will the GDP deflator. 
D)  One cannot generalize about the decrease in the consumer price index relative to the decrease in the GDP deflator.

Question 14

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. The cost of the basket in 2012 was

Accepted Answer

A)  $200. 
B)  $225. 
C)  $235. 
D)  $212.50. 
A)  $200. 
B)  $225. 
C)  $235. 
D)  $212.50.

Question 15

The price index was 220 in one year and 238.2 in the next year. What was the inflation rate?

Accepted Answer

A)  8.3 percent 
B)  108.3 percent 
C)  4.8 percent 
D)  38.2 percent 
A)  8.3 percent 
B)  108.3 percent 
C)  4.8 percent 
D)  38.2 percent

Question 16

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because

Accepted Answer

A)  new goods and services are always of higher quality than existing goods and services. 
B)  new goods and services cost less than existing goods and services. 
C)  new goods and services cost more than existing goods and services. 
D)  when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living. 
A)  new goods and services are always of higher quality than existing goods and services. 
B)  new goods and services cost less than existing goods and services. 
C)  new goods and services cost more than existing goods and services. 
D)  when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living.

Question 17

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was

Accepted Answer

A)  100.0. 
B)  100.7. 
C)  83.3. 
D)  84.6. 
A)  100.0. 
B)  100.7. 
C)  83.3. 
D)  84.6.

Question 18

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. To the nearest dollar, Will's 2010 food expenditures in 2009 dollars amount to

Accepted Answer

A)  $5,236. 
B)  $5,431. 
C)  $5,524. 
D)  $5,608. 
A)  $5,236. 
B)  $5,431. 
C)  $5,524. 
D)  $5,608.

Question 19

Suppose the price index was 105 in 2017, 126 in 2018, and the inflation rate was lower between 2018 and 2019 than it was between 2017 and 2018. This means that

Accepted Answer

A)  the price index in 2019 was lower than 126.0. 
B)  the price index in 2019 was lower than 147.0. 
C)  the price index in 2019 was lower than 151.2. 
D)  the inflation rate between 2018 and 2019 was lower than 1.2 percent. 
A)  the price index in 2019 was lower than 126.0. 
B)  the price index in 2019 was lower than 147.0. 
C)  the price index in 2019 was lower than 151.2. 
D)  the inflation rate between 2018 and 2019 was lower than 1.2 percent.

Question 20

The CPI is calculated

Accepted Answer

A)  weekly. 
B)  monthly. 
C)  quarterly. 
D)  yearly. 
A)  weekly. 
B)  monthly. 
C)  quarterly. 
D)  yearly.

Exam 16: Measuring the Cost of Living

Reports on the current consumer price index are released every

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 amount to $5,750. Then x, the consumer price index for 2011, has a value of

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that

Which of the following changes in the price index produces the greatest rate of inflation: 100 to 110, 150 to 165, or 180 to 198?

There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. -Refer to Table 24-8. If the base year is 2013, then the consumer price index was

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates. From this you conclude

In an imaginary economy, consumers buy only hot dogs and hamburgers. The fixed basket consists of 10 hot dogs and 6 hamburgers. A hot dog cost $3 in 2006 and $5.40 in 2007. A hamburger cost $5 in 2006 and $6 in 2007. Which of the following statements is correct?

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

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

What measure reflects the overall cost of goods and services produced domestically?

In general, if a consumer good is produced domestically and consumed domestically, a decrease in its price will have which of the following effects?

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. The cost of the basket in 2012 was

The price index was 220 in one year and 238.2 in the next year. What was the inflation rate?

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was

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. To the nearest dollar, Will's 2010 food expenditures in 2009 dollars amount to

Suppose the price index was 105 in 2017, 126 in 2018, and the inflation rate was lower between 2018 and 2019 than it was between 2017 and 2018. This means that

The CPI is calculated

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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