Question 1

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Accepted Answer

A)  fails to account for consumer spending on housing. 
B)  accounts only for consumer spending on food, clothing, and energy. 
C)  fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. 
D)  fails to account for the introduction of new goods. 
A)  fails to account for consumer spending on housing. 
B)  accounts only for consumer spending on food, clothing, and energy. 
C)  fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. 
D)  fails to account for the introduction of new goods.

Question 2

Table 24-11. Megan's salary for three consecutive years, along with other values, are presented in the table below.
  
-Refer to Table 24-11. Suppose the consumer price index for 2013 is not necessarily 235. If the nominal interest rate for 2013 is 7.3 percent , then the consumer price index for 2013 is, in fact,

Accepted Answer

A)  239.1. 
B)  235.5. 
C)  242.7. 
D)  250.9. 
A)  239.1. 
B)  235.5. 
C)  242.7. 
D)  250.9.

Question 3

In comparison to the situation in the late 1970s, the United States experienced lower nominal interest rates and higher real interest rates in the late 1990s.

Accepted Answer

A) True 
 B)False

Question 4

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 economy's inflation rate in 2010 is

Accepted Answer

A)  8 percent. 
B)  10 percent. 
C)  10.91 percent. 
D)  11.11 percent. 
A)  8 percent. 
B)  10 percent. 
C)  10.91 percent. 
D)  11.11 percent.

Question 5

In 1974, one could buy a theater for $1.25. Today the same theater ticket costs $6.50. Which pair of CPIs would imply that the cost in today's dollars was the same for both tickets?

Accepted Answer

A)  60 in 1964 and 390 today 
B)  75 in 1964 and 390 today 
C)  80 in 1964 and 404 today 
D)  95 in 1964 and 475 today 
A)  60 in 1964 and 390 today 
B)  75 in 1964 and 390 today 
C)  80 in 1964 and 404 today 
D)  95 in 1964 and 475 today

Question 6

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

Accepted Answer

A)  subways. 
B)  gasoline. 
C)  both subways and gasoline. 
D)  neither subways nor gasoline. 
A)  subways. 
B)  gasoline. 
C)  both subways and gasoline. 
D)  neither subways nor gasoline.

Question 7

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. If the base year is 2010, then the consumer price index was

Accepted Answer

A)  83.33 in 2009, 100.00 in 2010, and 96.67 in 2011. 
B)  85.56 in 2009, 100.00 in 2010, and 102.22 in 2011. 
C)  85.56 in 2009, 100.00 in 2010, and 96.67 in 2011. 
D)  92.22 in 2009, 99.00 in 2010, and 95.22 in 2011. 
A)  83.33 in 2009, 100.00 in 2010, and 96.67 in 2011. 
B)  85.56 in 2009, 100.00 in 2010, and 102.22 in 2011. 
C)  85.56 in 2009, 100.00 in 2010, and 96.67 in 2011. 
D)  92.22 in 2009, 99.00 in 2010, and 95.22 in 2011.

Question 8

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. If the base year is 2010, then the economy's inflation rate in 2010 was

Accepted Answer

A)  10.5 percent. 
B)  15.0 percent. 
C)  20.0 percent. 
D)  25.00 percent. 
A)  10.5 percent. 
B)  15.0 percent. 
C)  20.0 percent. 
D)  25.00 percent.

Question 9

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. The cost of the basket

Accepted Answer

A)  increased by $8 from 2012 to 2013. 
B)  increased by $41 from 2012 to 2013. 
C)  increased by $50 from 2012 to 2013. 
D)  increased by $60 from 2012 to 2013. 
A)  increased by $8 from 2012 to 2013. 
B)  increased by $41 from 2012 to 2013. 
C)  increased by $50 from 2012 to 2013. 
D)  increased by $60 from 2012 to 2013.

Question 10

The introduction of the video cassette recorder in the 1970s exemplified a problem in measuring the cost of living; that problem is the problem of

Accepted Answer

A)  substitution bias. 
B)  product-improvement bias. 
C)  introduction of new goods. 
D)  unmeasured quality change. 
A)  substitution bias. 
B)  product-improvement bias. 
C)  introduction of new goods. 
D)  unmeasured quality change.

Question 11

Archie has a savings account at a bank. If he earns 6 percent interest on his account and if there is deflation, then his purchasing power rises by more than 6 percent over the course of a year.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not correct?

Accepted Answer

A)  If the inflation rate exceeds the nominal interest rate, then the purchasing power of an interest-earning deposit falls over time. 
B)  If there is deflation, then the purchasing power of an interest-earning deposit rises by more than the nominal interest rate over time. 
C)  The higher the rate of inflation, the smaller the increase in the purchasing power of an interest-earning deposit. 
D)  The purchasing power of an interest-earning deposit can increase or decrease over time, but it cannot stay the same. 
A)  If the inflation rate exceeds the nominal interest rate, then the purchasing power of an interest-earning deposit falls over time. 
B)  If there is deflation, then the purchasing power of an interest-earning deposit rises by more than the nominal interest rate over time. 
C)  The higher the rate of inflation, the smaller the increase in the purchasing power of an interest-earning deposit. 
D)  The purchasing power of an interest-earning deposit can increase or decrease over time, but it cannot stay the same.

Question 13

A worker received $5 for a daily wage in 1930. What is the value of that wage today if the CPI was 17 in 1930 and is 230 today?

Accepted Answer

A)  37 cents 
B)  $4.63 
C)  $67.65 
D)  $37.86 
A)  37 cents 
B)  $4.63 
C)  $67.65 
D)  $37.86

Question 14

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Accepted Answer

A) True 
 B)False

Question 15

A COLA automatically raises the wage when

Accepted Answer

A)  GDP increases. 
B)  taxes increase. 
C)  the consumer price index increases. 
D)  the producer price index increases. 
A)  GDP increases. 
B)  taxes increase. 
C)  the consumer price index increases. 
D)  the producer price index increases.

Question 16

If the nominal interest rate is 4 percent and the real interest rate is 7 percent, then the inflation rate is

Accepted Answer

A)  -3 percent. 
B)  0.75 percent. 
C)  3 percent. 
D)  11 percent. 
A)  -3 percent. 
B)  0.75 percent. 
C)  3 percent. 
D)  11 percent.

Question 17

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

Accepted Answer

A) True 
 B)False

Question 18

Suppose the CPI was 56 in 1967, and suppose one must spend $349 today to obtain the same basket of goods and services that could be bought for $100 in 1967. Then today's CPI is

Accepted Answer

A)  223.7. 
B)  195.0. 
C)  623.2. 
D)  195.4. 
A)  223.7. 
B)  195.0. 
C)  623.2. 
D)  195.4.

Question 19

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

Accepted Answer

A)  -5 percent. 
B)  -1 percent. 
C)  5 percent. 
D)  3.2 percent. 
A)  -5 percent. 
B)  -1 percent. 
C)  5 percent. 
D)  3.2 percent.

Question 20

If the inflation rate decreased from 3.33% to 2.90% between October and November, while the nominal interest rate increased from 4.75% to 4.80%, what is the real interest rate in November?

Accepted Answer

The answer of If the inflation rate decreased from 3.33%...

Exam 11: Measuring the Cost of Living

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

In comparison to the situation in the late 1970s, the United States experienced lower nominal interest rates and higher real interest rates in the late 1990s.

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 economy's inflation rate in 2010 is

In 1974, one could buy a theater for $1.25. Today the same theater ticket costs $6.50. Which pair of CPIs would imply that the cost in today's dollars was the same for both tickets?

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

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. If the base year is 2010, then the consumer price index was

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. If the base year is 2010, then the economy's inflation rate in 2010 was

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. The cost of the basket

The introduction of the video cassette recorder in the 1970s exemplified a problem in measuring the cost of living; that problem is the problem of

Archie has a savings account at a bank. If he earns 6 percent interest on his account and if there is deflation, then his purchasing power rises by more than 6 percent over the course of a year.

Which of the following is not correct?

A worker received $5 for a daily wage in 1930. What is the value of that wage today if the CPI was 17 in 1930 and is 230 today?

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

A COLA automatically raises the wage when

If the nominal interest rate is 4 percent and the real interest rate is 7 percent, then the inflation rate is

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

Suppose the CPI was 56 in 1967, and suppose one must spend $349 today to obtain the same basket of goods and services that could be bought for $100 in 1967. Then today's CPI is

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

If the inflation rate decreased from 3.33% to 2.90% between October and November, while the nominal interest rate increased from 4.75% to 4.80%, what is the real interest rate in November?

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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