Question 1

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is

Accepted Answer

A)  -2.5 percent. 
B)  0.45 percent. 
C)  2.5 percent. 
D)  13.5 percent. 
A)  -2.5 percent. 
B)  0.45 percent. 
C)  2.5 percent. 
D)  13.5 percent.

Question 2

Suppose the nominal interest rate this year is 6.5% and that the economy experiences 2.3% deflation. What is the real interest rate?

Accepted Answer

The real i

Question 3

If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?

Accepted Answer

A)  45.5% 
B)  20.0% 
C)  16.7% 
D)  9.1% 
A)  45.5% 
B)  20.0% 
C)  16.7% 
D)  9.1%

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Table 24-13. Olivia's expenditures on clothing for three consecutive years, along with some values for the CPI, are presented in the table below.
  
-Refer to Table 24-13. Suppose Olivia's 2009 clothing expenditure in 2010 dollars amounts to $1,440. Then X, the consumer price index for 2009, has a value of

Accepted Answer

A)  120. 
B)  130. 
C)  140. 
D)  150. 
A)  120. 
B)  130. 
C)  140. 
D)  150.

Question 6

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 2013 was

Accepted Answer

A)  $150.50. 
B)  $147. 
C)  $154. 
D)  $301. 
A)  $150.50. 
B)  $147. 
C)  $154. 
D)  $301.

Question 7

To which of the problems in the construction of the CPI is the creation of the mobile phone most relevant?

Accepted Answer

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

Question 8

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 2010, then the consumer price index is

Accepted Answer

A)  100 in 2009, 109 in 2010, and 115 in 2011. 
B)  95.90 in 2009, 100 in 2010, and 107.44 in 2011. 
C)  90.91 in 2009, 100 in 2010, and 106.36 in 2011. 
D)  88.82 in 2009, 100 in 2010, and 107.44 in 2011. 
A)  100 in 2009, 109 in 2010, and 115 in 2011. 
B)  95.90 in 2009, 100 in 2010, and 107.44 in 2011. 
C)  90.91 in 2009, 100 in 2010, and 106.36 in 2011. 
D)  88.82 in 2009, 100 in 2010, and 107.44 in 2011.

Question 9

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 the consumer price index is 15.5 percent higher in 2011 than in 2009. Then Will's food expenditures for 2010 in 2011 dollars amount to

Accepted Answer

A)  $6,352. 
B)  $6,380. 
C)  $6,426. 
D)  $6,651. 
A)  $6,352. 
B)  $6,380. 
C)  $6,426. 
D)  $6,651.

Question 10

During a certain year, the nominal interest rate was 8 percent, the real interest rate was 3 percent, and the CPI was 176.7 at the beginning of the year. The CPI at the end of the year was

Accepted Answer

A)  196.1. 
B)  185.5. 
C)  168.3. 
D)  159.2. 
A)  196.1. 
B)  185.5. 
C)  168.3. 
D)  159.2.

Question 11

If the nominal interest rate is 4.2 percent and the rate of inflation is -0.5 percent, then the real interest rate is

Accepted Answer

A)  -8.4 percent. 
B)  -2.1 percent. 
C)  3.7 percent. 
D)  4.7 percent. 
A)  -8.4 percent. 
B)  -2.1 percent. 
C)  3.7 percent. 
D)  4.7 percent.

Question 12

Suppose that U.S. mining companies purchase German-made ore trucks at a reduced price. By itself, what effect will this purchase have on the GDP deflator and on the consumer price index?

Accepted Answer

A)  The consumer price index and the GDP deflator will both fall. 
B)  The consumer price index and the GDP deflator will both be unaffected. 
C)  The consumer price index will fall, and the GDP deflator will be unaffected. 
D)  The consumer price index will be unaffected, and the GDP deflator will fall. 
A)  The consumer price index and the GDP deflator will both fall. 
B)  The consumer price index and the GDP deflator will both be unaffected. 
C)  The consumer price index will fall, and the GDP deflator will be unaffected. 
D)  The consumer price index will be unaffected, and the GDP deflator will fall.

Question 13

Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that

Accepted Answer

A)  the best baseball players today are about 400 times better off than Babe Ruth was in 1931. 
B)  because prices have also risen, the standard of living of baseball stars hasn't changed since 1931. 
C)  one cannot make judgments about changes in the standard of living based on changes in prices and changes in incomes. 
D)  one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931. 
A)  the best baseball players today are about 400 times better off than Babe Ruth was in 1931. 
B)  because prices have also risen, the standard of living of baseball stars hasn't changed since 1931. 
C)  one cannot make judgments about changes in the standard of living based on changes in prices and changes in incomes. 
D)  one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931.

Question 14

The inflation rate is calculated

Accepted Answer

A)  by determining the change in the price index from the preceding period. 
B)  by determining the change in the price index from the base year. 
C)  by determining the percentage change in the price index from the preceding period. 
D)  by determining the percentage change in the price index from the base year. 
A)  by determining the change in the price index from the preceding period. 
B)  by determining the change in the price index from the base year. 
C)  by determining the percentage change in the price index from the preceding period. 
D)  by determining the percentage change in the price index from the base year.

Question 15

The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent and the real interest rate is 4.5 percent. If the consumer price index was 200 in 2007, what would the consumer price index value be in 2008?

Accepted Answer

A)  192 
B)  208 
C)  209 
D)  217 
A)  192 
B)  208 
C)  209 
D)  217

Question 16

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

Accepted Answer

A)  GDP deflator rises much more than does the consumer price index. 
B)  consumer price index rises much more than does the GDP deflator. 
C)  GDP deflator and the consumer price index rise by about the same amount. 
D)  consumer price index rises slightly more than does the GDP deflator. 
A)  GDP deflator rises much more than does the consumer price index. 
B)  consumer price index rises much more than does the GDP deflator. 
C)  GDP deflator and the consumer price index rise by about the same amount. 
D)  consumer price index rises slightly more than does the GDP deflator.

Question 17

The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

Accepted Answer

A) True 
 B)False

Question 18

Table 24-9
The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period.
  
-Refer to Table 24-9. What is the inflation rate for May?

Accepted Answer

A)  66.4% 
B)  60.1% 
C)  -4.1% 
D)  10% 
A)  66.4% 
B)  60.1% 
C)  -4.1% 
D)  10%

Question 19

The CPI does not reflect the increase in the value of the dollar that arises from the introduction of new goods.

Accepted Answer

A) True 
 B)False

Question 20

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

Accepted Answer

A)  $25.00 purchased in 1975. 
B)  $33.33 purchased in 1975. 
C)  $40.00 purchased in 1975. 
D)  $135.55 purchased in 1975. 
A)  $25.00 purchased in 1975. 
B)  $33.33 purchased in 1975. 
C)  $40.00 purchased in 1975. 
D)  $135.55 purchased in 1975.

Exam 11: Measuring the Cost of Living

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is

Suppose the nominal interest rate this year is 6.5% and that the economy experiences 2.3% deflation. What is the real interest rate?

If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?

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

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 2013 was

To which of the problems in the construction of the CPI is the creation of the mobile phone most relevant?

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 2010, then the consumer price index is

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 the consumer price index is 15.5 percent higher in 2011 than in 2009. Then Will's food expenditures for 2010 in 2011 dollars amount to

During a certain year, the nominal interest rate was 8 percent, the real interest rate was 3 percent, and the CPI was 176.7 at the beginning of the year. The CPI at the end of the year was

If the nominal interest rate is 4.2 percent and the rate of inflation is -0.5 percent, then the real interest rate is

Suppose that U.S. mining companies purchase German-made ore trucks at a reduced price. By itself, what effect will this purchase have on the GDP deflator and on the consumer price index?

Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that

The inflation rate is calculated

The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent and the real interest rate is 4.5 percent. If the consumer price index was 200 in 2007, what would the consumer price index value be in 2008?

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

Table 24-9 The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. -Refer to Table 24-9. What is the inflation rate for May?

The CPI does not reflect the increase in the value of the dollar that arises from the introduction of new goods.

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

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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