Question 1

The inflation rate reported in the news is usually calculated from the GDP deflator rather than the consumer price index.

Accepted Answer

A) True 
 B)False

Question 2

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?

Accepted Answer

A)  education & communication 
B)  food & beverages 
C)  medical care 
D)  recreation 
A)  education & communication 
B)  food & beverages 
C)  medical care 
D)  recreation

Question 3

Pauline is offered a Job in Minneapolis that pays $80,000. She is offered a similar job in Louisville that pays$71,200. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Accepted Answer

A)  90 in Minneapolis and 83 in Louisville 
B)  90 in Minneapolis and 72 in Louisville 
C)  100 in Minneapolis and 89 in Louisville 
D)  105 in Minneapolis and 90 in Louisville 
A)  90 in Minneapolis and 83 in Louisville 
B)  90 in Minneapolis and 72 in Louisville 
C)  100 in Minneapolis and 89 in Louisville 
D)  105 in Minneapolis and 90 in Louisville

Question 4

Table 24-8
The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers.
  
-Refer to Table 24-8. If the base year is 2013, then the economy's inflation rate in 2014 is

Accepted Answer

A)  11.1 percent. 
B)  200 percent. 
C)  10 percent. 
D)  90 percent. 
A)  11.1 percent. 
B)  200 percent. 
C)  10 percent. 
D)  90 percent.

Question 5

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Accepted Answer

A) True 
 B)False

Question 6

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

Accepted Answer

A)  The CPI was 100 in 2003, 110 in 2004, and 105 in 2005. 
B)  The CPI was 100 in 2003, 120 in 2004, and 135 in 2005. 
C)  The CPI was 100 in 2003, 105 in 2004, and 130 in 2005. 
D)  The CPI was 100 in 2003, 90 in 2004, and 88 in 2005. 
A)  The CPI was 100 in 2003, 110 in 2004, and 105 in 2005. 
B)  The CPI was 100 in 2003, 120 in 2004, and 135 in 2005. 
C)  The CPI was 100 in 2003, 105 in 2004, and 130 in 2005. 
D)  The CPI was 100 in 2003, 90 in 2004, and 88 in 2005.

Question 7

Suppose that the price of one gallon of milk was $0.25 in 1950, that the CPI in 1950 was 25, and that in 2000 the CPI was 200.What is the price of a 1950 gallon of milk in 2000 dollars?

Accepted Answer

The price of a 1950

Question 8

When the overall level of prices in the economy is increasing, economists say that the economy is experiencing

Accepted Answer

A)  economic growth. 
B)  stagflation. 
C)  inflation. 
D)  deflation. 
A)  economic growth. 
B)  stagflation. 
C)  inflation. 
D)  deflation.

Question 9

For purposes of calculating the CPI, the housing category of consumer spending includes the cost of

Accepted Answer

A)  shelter. 
B)  fuel and other utilities. 
C)  household furnishings and operation. 
D)  All of the above are correct. 
A)  shelter. 
B)  fuel and other utilities. 
C)  household furnishings and operation. 
D)  All of the above are correct.

Question 10

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was higher between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

Accepted Answer

A)  The CPI was 100 in 2003, 110 in 2004, and 105 in 2005. 
B)  The CPI was 100 in 2003, 120 in 2004, and 135 in 2005. 
C)  The CPI was 100 in 2003, 105 in 2004, and 130 in 2005. 
D)  The CPI was 100 in 2003, 90 in 2004, and 88 in 2005. 
A)  The CPI was 100 in 2003, 110 in 2004, and 105 in 2005. 
B)  The CPI was 100 in 2003, 120 in 2004, and 135 in 2005. 
C)  The CPI was 100 in 2003, 105 in 2004, and 130 in 2005. 
D)  The CPI was 100 in 2003, 90 in 2004, and 88 in 2005.

Question 11

Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $48,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Accepted Answer

A)  $23,040 
B)  $52,000 
C)  $79,200 
D)  $100,000 
A)  $23,040 
B)  $52,000 
C)  $79,200 
D)  $100,000

Question 12

Table 24-15
The table below lists the prices of chips and salsa for the months of October, November, and December. Assume that the typical consumer buys 8 bags of chips and 4 jars of salsa each month, and that October is the base period.
  
-Refer to Table 24-15. Calculate the inflation rate for November.

Accepted Answer

The answer of Table 24-15
The table below lists the prices...

Question 13

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?

Accepted Answer

A)  $5,400 
B)  $20,466 
C)  $26,158 
D)  $41,159 
A)  $5,400 
B)  $20,466 
C)  $26,158 
D)  $41,159

Question 14

Suppose that over the past year, the nominal interest rate was 5 percent, the CPI was 150.3 at the end of the year, and the CPI was 144.2 at the beginning of the year. It follows that

Accepted Answer

A)  the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 0.8 percent. 
B)  the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 9.2 percent. 
C)  the dollar value of savings increased at 0.8 percent, and the purchasing power of savings increased at 5 percent. 
D)  the dollar value of savings increased at 9.2 percent, and the purchasing power of savings increased at 5 percent. 
A)  the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 0.8 percent. 
B)  the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 9.2 percent. 
C)  the dollar value of savings increased at 0.8 percent, and the purchasing power of savings increased at 5 percent. 
D)  the dollar value of savings increased at 9.2 percent, and the purchasing power of savings increased at 5 percent.

Question 15

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 2013 is the base year, then the inflation rate in 2013 was

Accepted Answer

A)  24.7 percent. 
B)  54.0 percent. 
C)  32.8 percent. 
D)  38.0 percent. 
A)  24.7 percent. 
B)  54.0 percent. 
C)  32.8 percent. 
D)  38.0 percent.

Question 16

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.

Accepted Answer

A) True 
 B)False

Question 17

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 inflation rate in 2006 was

Accepted Answer

A)  44.4%. 
B)  50%. 
C)  62.5%. 
D)  80%. 
A)  44.4%. 
B)  50%. 
C)  62.5%. 
D)  80%.

Question 18

When ranking movies by nominal box office receipts, what important fact is overlooked?

Accepted Answer

A)  More people go to movies now than in the past. 
B)  There are no good substitutes for movies currently. 
C)  Prices, including those for movie tickets, have been rising over time. 
D)  Movies and DVD are complements. 
A)  More people go to movies now than in the past. 
B)  There are no good substitutes for movies currently. 
C)  Prices, including those for movie tickets, have been rising over time. 
D)  Movies and DVD are complements.

Question 19

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 C?

Accepted Answer

A)  120 
B)  25% 
C)  8.7% 
D)  12% 
A)  120 
B)  25% 
C)  8.7% 
D)  12%

Question 20

When the consumer price index rises, the typical family

Accepted Answer

A)  has to spend more dollars to maintain the same standard of living. 
B)  can spend fewer dollars to maintain the same standard of living. 
C)  finds that its standard of living is not affected. 
D)  can offset the effects of rising prices by saving more. 
A)  has to spend more dollars to maintain the same standard of living. 
B)  can spend fewer dollars to maintain the same standard of living. 
C)  finds that its standard of living is not affected. 
D)  can offset the effects of rising prices by saving more.

Exam 11: Measuring the Cost of Living

The inflation rate reported in the news is usually calculated from the GDP deflator rather than the consumer price index.

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?

Pauline is offered a Job in Minneapolis that pays $80,000. She is offered a similar job in Louisville that pays$71,200. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. -Refer to Table 24-8. If the base year is 2013, then the economy's inflation rate in 2014 is

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

Suppose that the price of one gallon of milk was $0.25 in 1950, that the CPI in 1950 was 25, and that in 2000 the CPI was 200.What is the price of a 1950 gallon of milk in 2000 dollars?

When the overall level of prices in the economy is increasing, economists say that the economy is experiencing

For purposes of calculating the CPI, the housing category of consumer spending includes the cost of

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was higher between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $48,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?

Suppose that over the past year, the nominal interest rate was 5 percent, the CPI was 150.3 at the end of the year, and the CPI was 144.2 at the beginning of the year. It follows that

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 2013 is the base year, then the inflation rate in 2013 was

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.

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 inflation rate in 2006 was

When ranking movies by nominal box office receipts, what important fact is overlooked?

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 C?

When the consumer price index rises, the typical family

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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