Question 1

A decrease in the price of domestically produced nuclear reactors will be reflected in

Accepted Answer

A)  both the GDP deflator and the consumer price index. 
B)  neither the GDP deflator nor the consumer price index. 
C)  the GDP deflator but not in the consumer price index. 
D)  the consumer price index but not in the GDP deflator. 
A)  both the GDP deflator and the consumer price index. 
B)  neither the GDP deflator nor the consumer price index. 
C)  the GDP deflator but not in the consumer price index. 
D)  the consumer price index but not in the GDP deflator.

Question 2

Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

Accepted Answer

A)  Ms. Lane will repay the bank fewer dollars than she initially borrowed. 
B)  Ms. Lane's repayment will give the bank less purchasing power than it originally loaned her. 
C)  Ms. Lane's repayment will give the bank greater purchasing power than it originally loaned her. 
D)  Ms. Lane's repayment will give the bank the same purchasing power that it originally loaned her. 
A)  Ms. Lane will repay the bank fewer dollars than she initially borrowed. 
B)  Ms. Lane's repayment will give the bank less purchasing power than it originally loaned her. 
C)  Ms. Lane's repayment will give the bank greater purchasing power than it originally loaned her. 
D)  Ms. Lane's repayment will give the bank the same purchasing power that it originally loaned her.

Question 3

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. If the nominal interest rate was 8 percent in 2010, then

Accepted Answer

A)  the real interest rate in 2010 was 3 percent. 
B)  the real interest rate in 2010 was 4 percent. 
C)  Will's 2009 food expenditures in 2010 dollars amount to $5,800. 
D)  Will's 2009 food expenditures in 2011 dollars amount to $6,200. 
A)  the real interest rate in 2010 was 3 percent. 
B)  the real interest rate in 2010 was 4 percent. 
C)  Will's 2009 food expenditures in 2010 dollars amount to $5,800. 
D)  Will's 2009 food expenditures in 2011 dollars amount to $6,200.

Question 4

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

Accepted Answer

A)  level of real GDP. 
B)  ratio of consumption to GDP. 
C)  ratio of net exports to GDP. 
D)  standard of living. 
A)  level of real GDP. 
B)  ratio of consumption to GDP. 
C)  ratio of net exports to GDP. 
D)  standard of living.

Question 5

When box office receipts are corrected for inflation, the most popular movie of all time is

Accepted Answer

A)  Star Wars. 
B)  Titanic. 
C)  Gone With the Wind. 
D)  The Sound of Music. 
A)  Star Wars. 
B)  Titanic. 
C)  Gone With the Wind. 
D)  The Sound of Music.

Question 6

Table 24-14
The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period.
  
-Refer to Table 24-14. Calculate the inflation rate for February.

Accepted Answer

The answer of Table 24-14
The table below lists the per...

Question 7

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 2006, then the CPI

Accepted Answer

A)  increased from 2004 to 2005 and increased from 2005 to 2006. 
B)  increased from 2004 to 2005 and decreased from 2005 to 2006. 
C)  decreased from 2004 to 2005 and increased from 2005 to 2006. 
D)  decreased from 2004 to 2005 and decreased from 2005 to 2006. 
A)  increased from 2004 to 2005 and increased from 2005 to 2006. 
B)  increased from 2004 to 2005 and decreased from 2005 to 2006. 
C)  decreased from 2004 to 2005 and increased from 2005 to 2006. 
D)  decreased from 2004 to 2005 and decreased from 2005 to 2006.

Question 8

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. To the nearest dollar, Will's 2010 food expenditures in 2009 dollars amount to

Accepted Answer

A)  $5,236. 
B)  $5,431. 
C)  $5,524. 
D)  $5,608. 
A)  $5,236. 
B)  $5,431. 
C)  $5,524. 
D)  $5,608.

Question 9

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 2012 was

Accepted Answer

A)  75.3. 
B)  100.0. 
C)  116.0. 
D)  132.8. 
A)  75.3. 
B)  100.0. 
C)  116.0. 
D)  132.8.

Question 10

For purposes of calculating the CPI, the food & beverages category of consumer spending includes the cost of

Accepted Answer

A)  food away from home. 
B)  alcoholic beverages. 
C)  both food away from home and alcoholic beverages. 
D)  neither food away from home nor alcoholic beverages because these are included in the recreation category of consumer spending. 
A)  food away from home. 
B)  alcoholic beverages. 
C)  both food away from home and alcoholic beverages. 
D)  neither food away from home nor alcoholic beverages because these are included in the recreation category of consumer spending.

Question 11

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 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 12

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 2012 is the base year, then the CPI for 2013 was

Accepted Answer

A)  95.7. 
B)  100.0. 
C)  104.4. 
D)  110.0. 
A)  95.7. 
B)  100.0. 
C)  104.4. 
D)  110.0.

Question 13

Suppose the consumer price index was 184 in 2009 and 198.17 in 2010. The nominal interest rate during this period was 5.8 percent. What was the real interest rate during this period?

Accepted Answer

A)  0.4 percent 
B)  1.2 percent 
C)  -1.9 percent 
D)  -2.6 percent 
A)  0.4 percent 
B)  1.2 percent 
C)  -1.9 percent 
D)  -2.6 percent

Question 14

Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112, 112 to 118, or 118 to 124?

Accepted Answer

A)  106 to 112 
B)  112 to 120 
C)  118 to 126 
D)  All of these changes produce the same rate of inflation. 
A)  106 to 112 
B)  112 to 120 
C)  118 to 126 
D)  All of these changes produce the same rate of inflation.

Question 15

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in

Accepted Answer

A)  1980 and lowest in 1970. 
B)  1980 and lowest in 1990. 
C)  1990 and lowest in 1970. 
D)  1990 and lowest in 1980. 
A)  1980 and lowest in 1970. 
B)  1980 and lowest in 1990. 
C)  1990 and lowest in 1970. 
D)  1990 and lowest in 1980.

Question 16

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 CPI for 2012 was

Accepted Answer

A)  75.3. 
B)  100.0. 
C)  116.0. 
D)  132.8. 
A)  75.3. 
B)  100.0. 
C)  116.0. 
D)  132.8.

Question 17

Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013.
-Refer to Scenario 24-3. In real terms, Sue Holloway's income amounts to about what percentage of Josh Holloway's income?

Accepted Answer

A)  11.0 percent 
B)  65.2 percent 
C)  70.9 percent 
D)  114.7 percent 
A)  11.0 percent 
B)  65.2 percent 
C)  70.9 percent 
D)  114.7 percent

Question 18

Which of the following statements about real and nominal interest rates is correct?

Accepted Answer

A)  When the nominal interest rate is rising, the real interest rate is necessarily rising; when the nominal interest rate is falling, the real interest rate is necessarily falling. 
B)  If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the real interest rate is 7 percent. 
C)  An increase in the real interest rate is necessarily accompanied by either an increase in the nominal interest rate, an increase in the inflation rate, or both. 
D)  When the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate. 
A)  When the nominal interest rate is rising, the real interest rate is necessarily rising; when the nominal interest rate is falling, the real interest rate is necessarily falling. 
B)  If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the real interest rate is 7 percent. 
C)  An increase in the real interest rate is necessarily accompanied by either an increase in the nominal interest rate, an increase in the inflation rate, or both. 
D)  When the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate.

Question 19

By not taking into account the possibility of consumer substitution, the CPI

Accepted Answer

A)  understates the cost of living. 
B)  overstates the cost of living. 
C)  may overstate or understate the cost of living, depending on how quickly prices rise. 
D)  may overstate or understate the cost of living, regardless of how quickly prices rise. 
A)  understates the cost of living. 
B)  overstates the cost of living. 
C)  may overstate or understate the cost of living, depending on how quickly prices rise. 
D)  may overstate or understate the cost of living, regardless of how quickly prices rise.

Question 20

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Accepted Answer

A)  The real interest rate is the nominal interest rate times the rate of inflation. 
B)  The real interest rate is the nominal interest rate minus the rate of inflation. 
C)  The real interest rate is the nominal interest rate plus the rate of inflation. 
D)  The real interest rate is the nominal interest rate divided by the rate of inflation. 
A)  The real interest rate is the nominal interest rate times the rate of inflation. 
B)  The real interest rate is the nominal interest rate minus the rate of inflation. 
C)  The real interest rate is the nominal interest rate plus the rate of inflation. 
D)  The real interest rate is the nominal interest rate divided by the rate of inflation.

Exam 11: Measuring the Cost of Living

A decrease in the price of domestically produced nuclear reactors will be reflected in

Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

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. If the nominal interest rate was 8 percent in 2010, then

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

When box office receipts are corrected for inflation, the most popular movie of all time is

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 2006, then the CPI

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. To the nearest dollar, Will's 2010 food expenditures in 2009 dollars amount to

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 2012 was

For purposes of calculating the CPI, the food & beverages category of consumer spending includes the cost of

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 in 2010 is

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 2012 is the base year, then the CPI for 2013 was

Suppose the consumer price index was 184 in 2009 and 198.17 in 2010. The nominal interest rate during this period was 5.8 percent. What was the real interest rate during this period?

Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112, 112 to 118, or 118 to 124?

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in

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 CPI for 2012 was

Which of the following statements about real and nominal interest rates is correct?

By not taking into account the possibility of consumer substitution, the CPI

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

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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