Question 1

The largest sector in the consumer price index market basket is food and beverage purchases.

Accepted Answer

A) True 
 B)False

Question 2

If the cost of housing increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Accepted Answer

A)  1.7 percent. 
B)  3.3 percent. 
C)  4.1 percent. 
D)  10 percent. 
A)  1.7 percent. 
B)  3.3 percent. 
C)  4.1 percent. 
D)  10 percent.

Question 3

If the CPI increased from 215 to 218 between the years 2012 and 2013, while the nominal interest rate increased from 3.25% to 3.80%, what is the real interest rate in 2013?

Accepted Answer

The answer of If the CPI increased from 215 to...

Question 4

Scenario 24-4
Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90.
-Refer to Scenario 24-4. If Quinn only cares about maximizing her purchasing power, then she should

Accepted Answer

A)  take the Charlieville job. 
B)  take the Wrexington job. 
C)  take either job because they both have the same purchasing power. 
D)  The answer cannot be determined from the information given because a salary is not the same as purchasing power. 
A)  take the Charlieville job. 
B)  take the Wrexington job. 
C)  take either job because they both have the same purchasing power. 
D)  The answer cannot be determined from the information given because a salary is not the same as purchasing power.

Question 5

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 inflation rate in 2013 was

Accepted Answer

A)  23.5 percent. 
B)  1.04 percent. 
C)  10 percent. 
D)  4.4 percent. 
A)  23.5 percent. 
B)  1.04 percent. 
C)  10 percent. 
D)  4.4 percent.

Question 6

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. Between 2009 and 2011, the cost of living increased by

Accepted Answer

A)  6 percent. 
B)  19 percent. 
C)  14 percent. 
D)  17 percent. 
A)  6 percent. 
B)  19 percent. 
C)  14 percent. 
D)  17 percent.

Question 7

In 1972, one could buy model rocket engines for $1.50 each. If those same engines cost $2.50 each today, then which pair of CPIs would make the engine prices in today's dollars the same for both years?

Accepted Answer

A)  60 in 1972 and 95 today 
B)  60 in 1972 and 120 today 
C)  90 in 1972 and 150 today 
D)  96 in 1972 and 154 today 
A)  60 in 1972 and 95 today 
B)  60 in 1972 and 120 today 
C)  90 in 1972 and 150 today 
D)  96 in 1972 and 154 today

Question 8

A worker received $5 for a daily wage in 1930, which has the equivalent value of $63.24 today. If the CPI was 17 in 1930 what is the value of the CPI today, rounded to the nearest whole number?

Accepted Answer

A)  215 
B)  134 
C)  17 
D)  1.3 
A)  215 
B)  134 
C)  17 
D)  1.3

Question 9

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 10

Suppose lawn mowers are part of the market basket used to compute the CPI. Suppose also that the quality of lawn mowers deteriorates while the price of lawn mowers stays the same. If the Bureau of Labor Statistics is able to precisely adjust the CPI for the improvement in quality, then, other things equal,

Accepted Answer

A)  the CPI will rise. 
B)  the CPI will fall. 
C)  the CPI will stay the same. 
D)  lawn mowers will no longer be included in the market basket. 
A)  the CPI will rise. 
B)  the CPI will fall. 
C)  the CPI will stay the same. 
D)  lawn mowers will no longer be included in the market basket.

Question 11

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 12

When box office receipts are not corrected for inflation,

Accepted Answer

A)  The Sound of Music ranks as the most popular movie of all time. 
B)  Gone with the Wind does not rank as one of the 50 most popular movies of all time. 
C)  Titanic ranks as the most popular movie of all time. 
D)  Avatar does not rank as one of the 50 most popular movies of all time. 
A)  The Sound of Music ranks as the most popular movie of all time. 
B)  Gone with the Wind does not rank as one of the 50 most popular movies of all time. 
C)  Titanic ranks as the most popular movie of all time. 
D)  Avatar does not rank as one of the 50 most popular movies of all time.

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 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 14

Scenario 24-6
A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year.  
-Refer to Scenario 24-6. Using 2010 as the base year, what is the inflation rate in 2011?

Accepted Answer

The inflat

Question 15

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 16

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

Accepted Answer

A) True 
 B)False

Question 17

If the price of Spanish olives imported into the United States decreases, then

Accepted Answer

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

Question 18

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

Accepted Answer

A)  $17 more in his account, and his purchasing power has increased by $10. 
B)  $30 more in his account, and his purchasing power has increased by $50. 
C)  $40 more in his account, and his purchasing power has increased by $33. 
D)  $50 more in his account, and his purchasing power has increased by $33. 
A)  $17 more in his account, and his purchasing power has increased by $10. 
B)  $30 more in his account, and his purchasing power has increased by $50. 
C)  $40 more in his account, and his purchasing power has increased by $33. 
D)  $50 more in his account, and his purchasing power has increased by $33.

Question 19

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 20

The group of goods and services used to compute the GDP deflator changes automatically over time, but the group of goods and services used to compute the CPI does not.

Accepted Answer

A) True 
 B)False

Exam 24: Measuring the Cost of Living

The largest sector in the consumer price index market basket is food and beverage purchases.

If the cost of housing increases by 10 percent, then, other things the same, the CPI is likely to increase by about

If the CPI increased from 215 to 218 between the years 2012 and 2013, while the nominal interest rate increased from 3.25% to 3.80%, what is the real interest rate in 2013?

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 inflation rate in 2013 was

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. Between 2009 and 2011, the cost of living increased by

In 1972, one could buy model rocket engines for $1.50 each. If those same engines cost $2.50 each today, then which pair of CPIs would make the engine prices in today's dollars the same for both years?

A worker received $5 for a daily wage in 1930, which has the equivalent value of $63.24 today. If the CPI was 17 in 1930 what is the value of the CPI today, rounded to the nearest whole number?

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

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

When box office receipts are not corrected for inflation,

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

Scenario 24-6 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-6. Using 2010 as the base year, what is the inflation rate in 2011?

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

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

If the price of Spanish olives imported into the United States decreases, then

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

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

The group of goods and services used to compute the GDP deflator changes automatically over time, but the group of goods and services used to compute the CPI does not.

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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

Filters