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

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. The cost of the basket in 2012 was

Accepted Answer

A)  $108. 
B)  $116. 
C)  $112. 
D)  $224. 
A)  $108. 
B)  $116. 
C)  $112. 
D)  $224.

Question 3

Which of the following is not correct?

Accepted Answer

A)  The U.S. economy has never experienced deflation. 
B)  Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate. 
C)  Since 1965, the U.S. economy has experienced rising consumer prices in most years. 
D)  During deflation, the real interest rate exceeds the nominal interest rate. 
A)  The U.S. economy has never experienced deflation. 
B)  Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate. 
C)  Since 1965, the U.S. economy has experienced rising consumer prices in most years. 
D)  During deflation, the real interest rate exceeds the nominal interest rate.

Question 4

From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education between 2009 and 2010?

Accepted Answer

A)  0.9% 
B)  9.0% 
C)  2.5% 
D)  90% 
A)  0.9% 
B)  9.0% 
C)  2.5% 
D)  90%

Question 5

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

Accepted Answer

A)  100 in 2009, 109 in 2010, and 115 in 2011. 
B)  100 in 2009, 110 in 2010, and 117 in 2011. 
C)  110 in 2009, 121 in 2010, and 128.26 in 2011. 
D)  44 in 2009, 48.4 in 2010, and 51.48 in 2011. 
A)  100 in 2009, 109 in 2010, and 115 in 2011. 
B)  100 in 2009, 110 in 2010, and 117 in 2011. 
C)  110 in 2009, 121 in 2010, and 128.26 in 2011. 
D)  44 in 2009, 48.4 in 2010, and 51.48 in 2011.

Question 6

The real interest rate tells you how fast the purchasing power of your bank account rises over time.

Accepted Answer

A) True 
 B)False

Question 7

If the real interest rate is 6.8% and the inflation rate is 3.9%, what is the nominal interest rate?

Accepted Answer

The nomina

Question 8

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 amounted to $5,670. Suppose also that the real interest rate in 2011 was 3 percent. Then, in 2011,

Accepted Answer

A)  the inflation rate was 8 percent and the nominal interest rate was 5 percent. 
B)  the inflation rate was 9 percent and the nominal interest rate was 6 percent. 
C)  the inflation rate was 8 percent and the nominal interest rate was 11 percent. 
D)  the inflation rate was 9 percent and the nominal interest rate was 12 percent. 
A)  the inflation rate was 8 percent and the nominal interest rate was 5 percent. 
B)  the inflation rate was 9 percent and the nominal interest rate was 6 percent. 
C)  the inflation rate was 8 percent and the nominal interest rate was 11 percent. 
D)  the inflation rate was 9 percent and the nominal interest rate was 12 percent.

Question 9

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 10

If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the inflation rate is 11 percent for 2006.

Accepted Answer

A) True 
 B)False

Question 11

In the United States in the late 1970s, nominal interest rates were high and inflation rates were very high. As a result, real interest rates were

Accepted Answer

A)  very high. 
B)  high. 
C)  low, but never negative. 
D)  low, and in some years they were negative. 
A)  very high. 
B)  high. 
C)  low, but never negative. 
D)  low, and in some years they were negative.

Question 12

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

Accepted Answer

A)  The CPI involves a base year; the GDP deflator does not involve a base year. 
B)  The CPI can be used to compute the inflation rate; the GDP deflator cannot be used to compute the inflation rate. 
C)  The CPI reflects the prices of goods and services produced domestically; the GDP deflator reflects the prices of all goods and services bought by consumers. 
D)  The CPI reflects a fixed basket of goods and services; the GDP deflator reflects current production of goods and services. 
A)  The CPI involves a base year; the GDP deflator does not involve a base year. 
B)  The CPI can be used to compute the inflation rate; the GDP deflator cannot be used to compute the inflation rate. 
C)  The CPI reflects the prices of goods and services produced domestically; the GDP deflator reflects the prices of all goods and services bought by consumers. 
D)  The CPI reflects a fixed basket of goods and services; the GDP deflator reflects current production of goods and services.

Question 13

The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts, and 2 pairs of pants. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each, and pants cost $10.00 per pair. In 2006, bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each, and pants cost $12.00 per pair. Using 2005 as the base year, what was Aquilonia's inflation rate in 2006?

Accepted Answer

A)  4 percent 
B)  11 percent 
C)  19.6 percent 
D)  24.4 percent 
A)  4 percent 
B)  11 percent 
C)  19.6 percent 
D)  24.4 percent

Question 14

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

Accepted Answer

A)  increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
B)  increases, so the CPI understates the change in the cost of living if the quality change is not accounted for. 
C)  decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
D)  decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for. 
A)  increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
B)  increases, so the CPI understates the change in the cost of living if the quality change is not accounted for. 
C)  decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
D)  decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.

Question 15

The price index that measures the cost of a basket of goods and services bought by firms is called the

Accepted Answer

A)  industrial price index. 
B)  producer price index. 
C)  core price index. 
D)  GDP deflator. 
A)  industrial price index. 
B)  producer price index. 
C)  core price index. 
D)  GDP deflator.

Question 16

Scenario 24-1
The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-1. The price of a 1975 tennis ball in 2005 dollars is

Accepted Answer

A)  $0.03. 
B)  $0.27. 
C)  $0.37. 
D)  $1.00. 
A)  $0.03. 
B)  $0.27. 
C)  $0.37. 
D)  $1.00.

Question 17

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 18

Scenario 24-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost

Accepted Answer

A)  $0.55, so golf balls were cheaper in 1975. 
B)  $0.55, so golf balls were cheaper in 2005. 
C)  $7.32, so golf balls were cheaper in 1975. 
D)  $7.32, so golf balls were cheaper in 2005. 
A)  $0.55, so golf balls were cheaper in 1975. 
B)  $0.55, so golf balls were cheaper in 2005. 
C)  $7.32, so golf balls were cheaper in 1975. 
D)  $7.32, so golf balls were cheaper in 2005.

Question 19

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 20

Which of the following statements is correct?

Accepted Answer

A)  The CPI can be used to compare dollar figures from different points in time. 
B)  The percentage change in the CPI is a measure of the inflation rate, but the percentage change in the GDP deflator is not a measure of the inflation rate. 
C)  Compared to the consumer price index CPI), the GDP deflator is the more common gauge of inflation. 
D)  The GDP deflator better reflects the goods and services bought by consumers than does the CPI. 
A)  The CPI can be used to compare dollar figures from different points in time. 
B)  The percentage change in the CPI is a measure of the inflation rate, but the percentage change in the GDP deflator is not a measure of the inflation rate. 
C)  Compared to the consumer price index CPI), the GDP deflator is the more common gauge of inflation. 
D)  The GDP deflator better reflects the goods and services bought by consumers than does the CPI.

Exam 11: Measuring the Cost of Living

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

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. The cost of the basket in 2012 was

Which of the following is not correct?

From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education between 2009 and 2010?

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

The real interest rate tells you how fast the purchasing power of your bank account rises over time.

If the real interest rate is 6.8% and the inflation rate is 3.9%, what is the nominal interest rate?

In the United States, nominal interest rates were

If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the inflation rate is 11 percent for 2006.

In the United States in the late 1970s, nominal interest rates were high and inflation rates were very high. As a result, real interest rates were

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

The price index that measures the cost of a basket of goods and services bought by firms is called the

Scenario 24-1 The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-1. The price of a 1975 tennis ball in 2005 dollars is

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

Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost

Which of the following is not correct?

Which of the following statements is correct?

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

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

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 Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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