Question 1

Data from the Bureau of Labor Statistics show that the largest category of consumer spending is housing.

Accepted Answer

A) True 
 B)False

Question 2

In the calculation of the CPI, books are given greater weight than magazines if

Accepted Answer

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

Question 3

The real interest rate measures the change in dollar amounts.

Accepted Answer

A) True 
 B)False

Question 4

From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the inflation rate for medical care?

Accepted Answer

A)  5.7 percent 
B)  6.0 percent 
C)  9.0 percent 
D)  59.0 percent 
A)  5.7 percent 
B)  6.0 percent 
C)  9.0 percent 
D)  59.0 percent

Question 5

You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in 1962 prices?

Accepted Answer

A)  sixty cents × today's CPI - 1962 CPI) 
B)  sixty cents × 1962 CPI - today's CPI) 
C)  sixty cents × today's CPI / 1962 CPI) 
D)  sixty cents × 1962 CPI / today's CPI) 
A)  sixty cents × today's CPI - 1962 CPI) 
B)  sixty cents × 1962 CPI - today's CPI) 
C)  sixty cents × today's CPI / 1962 CPI) 
D)  sixty cents × 1962 CPI / today's CPI)

Question 6

Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

Accepted Answer

A) True 
 B)False

Question 7

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?

Accepted Answer

The answer of Michael Jordan's rookie salary in 1984 was...

Question 8

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 2013 is the base year, then the CPI for 2013 was

Accepted Answer

A)  95.7. 
B)  100.0. 
C)  90.0. 
D)  213.6. 
A)  95.7. 
B)  100.0. 
C)  90.0. 
D)  213.6.

Question 9

Which entity within the U.S. government is responsible for computing and reporting the CPI?

Accepted Answer

A)  the Department of Commerce 
B)  the Department of Labor 
C)  the General Accounting Office 
D)  the Council of Economic Advisers 
A)  the Department of Commerce 
B)  the Department of Labor 
C)  the General Accounting Office 
D)  the Council of Economic Advisers

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 2013 was

Accepted Answer

A)  100.0. 
B)  116.0. 
C)  132.8. 
D)  154.0. 
A)  100.0. 
B)  116.0. 
C)  132.8. 
D)  154.0.

Question 11

The GDP deflator reflects the prices of all goods and services produced around the world, whereas the consumer price index reflects the prices of all goods and services bought by consumers.

Accepted Answer

A) True 
 B)False

Question 12

The inflation rate you are likely to hear on the nightly news is calculated from

Accepted Answer

A)  the GDP deflator. 
B)  the CPI. 
C)  the Dow Jones Industrial Average. 
D)  the unemployment rate. 
A)  the GDP deflator. 
B)  the CPI. 
C)  the Dow Jones Industrial Average. 
D)  the unemployment rate.

Question 13

Table 24-16
The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year.
  
-Refer to Table 24-16. Calculate the missing value that belongs in space A.

Accepted Answer

The answer of Table 24-16
The table below lists annual consumer...

Question 14

Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will

Accepted Answer

A)  increase less than will the consumer price index. 
B)  increase more than will the consumer price index. 
C)  not increase, but the consumer price index will increase. 
D)  increase, but the consumer price index will not increase. 
A)  increase less than will the consumer price index. 
B)  increase more than will the consumer price index. 
C)  not increase, but the consumer price index will increase. 
D)  increase, but the consumer price index will not increase.

Question 15

Changes in the producer price index are often thought to be useful in predicting changes in

Accepted Answer

A)  stock prices. 
B)  the consumer price index. 
C)  the unemployment rate. 
D)  the rate of output of goods and services. 
A)  stock prices. 
B)  the consumer price index. 
C)  the unemployment rate. 
D)  the rate of output of goods and services.

Question 16

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

Accepted Answer

A)  Car makers benefit from a new technology that allows them to sell higher-quality cars to consumers with no increase in price. 
B)  Energy prices decrease, and consumers respond by buying more gas and electricity. 
C)  A new good is introduced that renders cellular telephones inferior and obsolete. 
D)  All of the above are correct. 
A)  Car makers benefit from a new technology that allows them to sell higher-quality cars to consumers with no increase in price. 
B)  Energy prices decrease, and consumers respond by buying more gas and electricity. 
C)  A new good is introduced that renders cellular telephones inferior and obsolete. 
D)  All of the above are correct.

Question 17

If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest rate is

Accepted Answer

A)  -4 percent. 
B)  3 percent. 
C)  4 percent. 
D)  8 percent. 
A)  -4 percent. 
B)  3 percent. 
C)  4 percent. 
D)  8 percent.

Question 18

When a new good is introduced, consumers have more variety from which to choose, and this in turn increases the cost of maintaining the same level of economic well-being.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

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

Question 20

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 in 2004 was

Accepted Answer

A)  0. 
B)  1. 
C)  80. 
D)  100. 
A)  0. 
B)  1. 
C)  80. 
D)  100.

Exam 11: Measuring the Cost of Living

Data from the Bureau of Labor Statistics show that the largest category of consumer spending is housing.

In the calculation of the CPI, books are given greater weight than magazines if

The real interest rate measures the change in dollar amounts.

From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the inflation rate for medical care?

You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in 1962 prices?

Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

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?

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 2013 is the base year, then the CPI for 2013 was

Which entity within the U.S. government is responsible for computing and reporting 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. If 2012 is the base year, then the CPI for 2013 was

The GDP deflator reflects the prices of all goods and services produced around the world, whereas the consumer price index reflects the prices of all goods and services bought by consumers.

The inflation rate you are likely to hear on the nightly news is calculated from

Table 24-16 The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year. -Refer to Table 24-16. Calculate the missing value that belongs in space A.

Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will

Changes in the producer price index are often thought to be useful in predicting changes in

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

If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest rate is

When a new good is introduced, consumers have more variety from which to choose, and this in turn increases the cost of maintaining the same level of economic well-being.

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

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 in 2004 was

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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