Exam 16: Measuring the Cost of Living

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.

Suppose you know the value of the consumer price index CPI) in year 2 as well as the inflation rate in year 2. Which of the following equations is valid for the CPI in year 1?

Data from the Bureau of Labor Statistics show that consumer spending on medical care is about equal to consumer spending on recreation and consumer spending on education and communication.

The purpose of measuring the overall level of prices in the economy is to permit comparison between dollar figures from different times.

Persistent increases in the overall level of prices have been the norm.

The introduction of the video cassette recorder in the 1970s exemplified a problem in measuring the cost of living; that problem is the problem of

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

Michael Jordan's rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9, while the CPI in 2010 was 218.1. What is Michael Jordan's rookie salary in 2010 dollars?

Suppose you know the value of the consumer price index CPI) in year 1 as well as the inflation rate in year 2. Which of the following equations is valid for the CPI in year 2?

Scenario 24-3 Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013. -Refer to Scenario 24-3. Josh Holloway's 2013 income in 1944 dollars is

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the largest?

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. If the base year is 2009, then the consumer price index is

In a period of inflation real interest rates will be greater than nominal interest rates.

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

Which of these events would cause the consumer price index to overstate the increase in the cost of living?

Assume most athletic apparel bought by U.S. consumers is imported from other nations. If all else is constant, an increase in the price of foreign-made athletic apparel will cause the U.S.

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.

Scenario 24-5 Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-5. What are the prices of books, CDs, and DVDs in 2010?

If the real value of an item bought ten years ago is less than it's nominal value at that time, what can one infer about the change in the overall price level during this ten year period?

It is possible to observe a positive nominal interest rate together with a negative real interest rate.