Question 1

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

Accepted Answer

A)  5.6 percent between the first and second years, and 7.7 percent between the second and third years. 
B)  5.9 percent between the first and second years, and 8.3 percent between the second and third years. 
C)  10 percent between the first and second years, and 15 percent between the second and third years. 
D)  80 percent between the first and second years, and 95 percent between the second and third years. 
A)  5.6 percent between the first and second years, and 7.7 percent between the second and third years. 
B)  5.9 percent between the first and second years, and 8.3 percent between the second and third years. 
C)  10 percent between the first and second years, and 15 percent between the second and third years. 
D)  80 percent between the first and second years, and 95 percent between the second and third years.

Question 2

Which of the following pairs of values of the consumer price index CPI) is consistent with an inflation rate of 10 percent for 2014?

Accepted Answer

A)  CPI in 2014 = 90; CPI in 2015 = 100 
B)  CPI in 2014 = 102; CPI in 2015 = 112 
C)  CPI in 2013 = 210; CPI in 2014 = 220 
D)  CPI in 2013 = 210; CPI in 2014 = 231 
A)  CPI in 2014 = 90; CPI in 2015 = 100 
B)  CPI in 2014 = 102; CPI in 2015 = 112 
C)  CPI in 2013 = 210; CPI in 2014 = 220 
D)  CPI in 2013 = 210; CPI in 2014 = 231

Question 3

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

Accepted Answer

A)  75 in 2012, 92.8 in 2013, and 100 in 2014. 
B)  75 in 2012, 93.2 in 2013, and 100 in 2014. 
C)  247.5 in 2012, 307.5 in 2013, and 330 in 2014. 
D)  210 in 2012, 260 in 2013, and 280 in 2014. 
A)  75 in 2012, 92.8 in 2013, and 100 in 2014. 
B)  75 in 2012, 93.2 in 2013, and 100 in 2014. 
C)  247.5 in 2012, 307.5 in 2013, and 330 in 2014. 
D)  210 in 2012, 260 in 2013, and 280 in 2014.

Question 4

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. Using 2010 as the base year, what is the CPI in each year?

Accepted Answer

In 2009 the CPI is 9

Question 5

The consumer price index was 225 in 2008 and 232.2 in 2009. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

Accepted Answer

A)  1.6 percent 
B)  3.3 percent 
C)  5.1 percent 
D)  7.4 percent 
A)  1.6 percent 
B)  3.3 percent 
C)  5.1 percent 
D)  7.4 percent

Question 6

Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.

Accepted Answer

A) True 
 B)False

Question 7

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 A?

Accepted Answer

A)  14 
B)  150 
C)  144 
D)  154 
A)  14 
B)  150 
C)  144 
D)  154

Question 8

A COLA automatically raises the wage when the CPI rises.

Accepted Answer

A) True 
 B)False

Question 9

The term inflation is used to describe a situation in which

Accepted Answer

A)  the overall level of prices in the economy is increasing. 
B)  incomes in the economy are increasing. 
C)  stock-market prices are rising. 
D)  the economy is growing rapidly. 
A)  the overall level of prices in the economy is increasing. 
B)  incomes in the economy are increasing. 
C)  stock-market prices are rising. 
D)  the economy is growing rapidly.

Question 10

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

Accepted Answer

A)  $39,333.33. 
B)  $74,000.00. 
C)  $89,333.33. 
D)  $63,559.32. 
A)  $39,333.33. 
B)  $74,000.00. 
C)  $89,333.33. 
D)  $63,559.32.

Question 11

Which of the following is the correct formula for calculating the consumer price index?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 12

If the CPI was 120 in 1994, was 126 in 1995, and was 134.82 in 1996, what was the inflation rate in 1995 and in 1996?

Accepted Answer

The inflation rate i

Question 13

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 economy's inflation rate is

Accepted Answer

A)  10 percent in 2010 and 6.36 percent in 2011. 
B)  10 percent in 2010 and 17 percent in 2011. 
C)  9.2 percent in 2010 and 6 percent in 2011. 
D)  8.22 percent in 2010 and 5 percent in 2011. 
A)  10 percent in 2010 and 6.36 percent in 2011. 
B)  10 percent in 2010 and 17 percent in 2011. 
C)  9.2 percent in 2010 and 6 percent in 2011. 
D)  8.22 percent in 2010 and 5 percent in 2011.

Question 14

Which of the following is correct?

Accepted Answer

A)  Nominal and real interest rates always move together. 
B)  Nominal and real interest rates never move together. 
C)  Nominal and real interest rates do not always move together. 
D)  Nominal and real interest rates always move in opposite directions. 
A)  Nominal and real interest rates always move together. 
B)  Nominal and real interest rates never move together. 
C)  Nominal and real interest rates do not always move together. 
D)  Nominal and real interest rates always move in opposite directions.

Question 15

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. The cost of the basket

Accepted Answer

A)  decreased by $2 from 2004 to 2005. 
B)  increased by $3 from 2004 to 2005. 
C)  increased by $7 from 2004 to 2005. 
D)  increased by $10 from 2004 to 2005. 
A)  decreased by $2 from 2004 to 2005. 
B)  increased by $3 from 2004 to 2005. 
C)  increased by $7 from 2004 to 2005. 
D)  increased by $10 from 2004 to 2005.

Question 16

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's 2001 salary in 2006 dollars is

Accepted Answer

A)  $75,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
B)  $75,000; thus, Ruben's purchasing power decreased between 2001 and 2006. 
C)  $85,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
D)  $85,000; thus, Ruben's purchasing power decreased between 2001 and 2006. 
A)  $75,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
B)  $75,000; thus, Ruben's purchasing power decreased between 2001 and 2006. 
C)  $85,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
D)  $85,000; thus, Ruben's purchasing power decreased between 2001 and 2006.

Question 17

If the nominal interest rate is 5 percent and the rate of inflation is 9 percent, then the real interest rate is

Accepted Answer

A)  -4 percent. 
B)  -0.44 percent. 
C)  4 percent. 
D)  14 percent. 
A)  -4 percent. 
B)  -0.44 percent. 
C)  4 percent. 
D)  14 percent.

Question 18

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. The cost of the basket

Accepted Answer

A)  increased from 2009 to 2010 and increased from 2010 to 2011. 
B)  increased from 2009 to 2010 and decreased from 2010 to 2011. 
C)  decreased from 2009 to 2010 and increased from 2010 to 2011. 
D)  decreased from 2009 to 2010 and decreased from 2010 to 2011. 
A)  increased from 2009 to 2010 and increased from 2010 to 2011. 
B)  increased from 2009 to 2010 and decreased from 2010 to 2011. 
C)  decreased from 2009 to 2010 and increased from 2010 to 2011. 
D)  decreased from 2009 to 2010 and decreased from 2010 to 2011.

Question 19

Suppose the price index was 100 in 2014, 109 in 2015, and the inflation rate was lower between 2015 and 2016 than it was between 2014 and 2015. This means that

Accepted Answer

A)  the price index in 2016 was lower than 109.0. 
B)  the price index in 2016 was lower than 118.9. 
C)  the price index in 2016 was lower than 118.0. 
D)  the inflation rate between 2015 and 2016 was lower than 1.09 percent. 
A)  the price index in 2016 was lower than 109.0. 
B)  the price index in 2016 was lower than 118.9. 
C)  the price index in 2016 was lower than 118.0. 
D)  the inflation rate between 2015 and 2016 was lower than 1.09 percent.

Question 20

Michelle bought word-processing software in 2009 for $75. Michelle's cousin, Barry, bought an upgrade of the same software in 2010 for $75. To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

A)  substitution bias 
B)  unmeasured quality change 
C)  introduction of new goods 
D)  income bias 
A)  substitution bias 
B)  unmeasured quality change 
C)  introduction of new goods 
D)  income bias

Exam 11: Measuring the Cost of Living

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

Which of the following pairs of values of the consumer price index CPI) is consistent with an inflation rate of 10 percent for 2014?

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

The consumer price index was 225 in 2008 and 232.2 in 2009. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.

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 A?

A COLA automatically raises the wage when the CPI rises.

The term inflation is used to describe a situation in which

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

Which of the following is the correct formula for calculating the consumer price index?

If the CPI was 120 in 1994, was 126 in 1995, and was 134.82 in 1996, what was the inflation rate in 1995 and in 1996?

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 economy's inflation rate is

Which of the following is correct?

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. The cost of the basket

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's 2001 salary in 2006 dollars is

If the nominal interest rate is 5 percent and the rate of inflation is 9 percent, then the real interest rate is

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. The cost of the basket

Suppose the price index was 100 in 2014, 109 in 2015, and the inflation rate was lower between 2015 and 2016 than it was between 2014 and 2015. This means that

Michelle bought word-processing software in 2009 for $75. Michelle's cousin, Barry, bought an upgrade of the same software in 2010 for $75. To which problem in the construction of the CPI is this situation most relevant?

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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