Question 1

If the CPI was 108.00 in 1942 and is 336.96 today, then $10 in 1942 purchased the same amount of goods and services as

Accepted Answer

A)  $2.57 purchases today. 
B)  $28.89 purchases today. 
C)  $31.20 purchases today. 
D)  $38.89 purchases today. 
A)  $2.57 purchases today. 
B)  $28.89 purchases today. 
C)  $31.20 purchases today. 
D)  $38.89 purchases today.

Question 2

Suppose a basket of goods and services has been selected to calculate the CPI. In 2002, the basket's cost was $80; in 2008, the basket's cost was $92; and in 2010, the basket's cost was $108. The base year must be

Accepted Answer

A)  2002. 
B)  2008. 
C)  one of the years between 2008 and 2010. 
D)  The base year cannot be determined from the given information. 
A)  2002. 
B)  2008. 
C)  one of the years between 2008 and 2010. 
D)  The base year cannot be determined from the given information.

Question 3

Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price of ginger ale has increased 15 percent, so she decides to buy some peppermint tea instead. To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

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

Question 4

Which of the following is not an example of a price index computed by the Bureau of Labor Statistics?

Accepted Answer

A)  the Los Angeles price index 
B)  the energy price index 
C)  the producer price index 
D)  the stock price index 
A)  the Los Angeles price index 
B)  the energy price index 
C)  the producer price index 
D)  the stock price index

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

Accepted Answer

A)  22.5 percent. 
B)  2.35 percent. 
C)  10 percent. 
D)  4.4 percent. 
A)  22.5 percent. 
B)  2.35 percent. 
C)  10 percent. 
D)  4.4 percent.

Question 6

With respect to the consumer price index, which of the following does not serve as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

Accepted Answer

A)  rises from $0.80 to $1.00 while the price of a loaf of bread rises from $2.00 to $2.50. 
B)  rises from $1.00 to $1.30 while the price of a loaf of bread rises from $2.00 to $2.30. 
C)  remains constant, while the price of a loaf of bread rises from $2.00 to $2.30. 
D)  falls from $1.00 to $0.80 while the price of a loaf of bread falls from $2.00 to $1.80. 
A)  rises from $0.80 to $1.00 while the price of a loaf of bread rises from $2.00 to $2.50. 
B)  rises from $1.00 to $1.30 while the price of a loaf of bread rises from $2.00 to $2.30. 
C)  remains constant, while the price of a loaf of bread rises from $2.00 to $2.30. 
D)  falls from $1.00 to $0.80 while the price of a loaf of bread falls from $2.00 to $1.80.

Question 7

The CPI and the GDP deflator

Accepted Answer

A)  generally move together. 
B)  generally show different patterns of movement. 
C)  always show identical changes. 
D)  always show different patterns of movement. 
A)  generally move together. 
B)  generally show different patterns of movement. 
C)  always show identical changes. 
D)  always show different patterns of movement.

Question 8

If the current year CPI is 90, then the price level has decreased 10 percent since the base year.

Accepted Answer

A) True 
 B)False

Question 9

Categories of U.S. consumer spending, ranked from largest to smallest, are

Accepted Answer

A)  housing, food & beverages, education & communication, and transportation. 
B)  education & communication, housing, food & beverages, and transportation. 
C)  food & beverages, housing, transportation, and medical care. 
D)  housing, transportation, food & beverages, and medical care. 
A)  housing, food & beverages, education & communication, and transportation. 
B)  education & communication, housing, food & beverages, and transportation. 
C)  food & beverages, housing, transportation, and medical care. 
D)  housing, transportation, food & beverages, and medical care.

Question 10

Table 24-16
The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year.  
-Refer to Table 24-16. Calculate the missing value that belongs in space C.

Accepted Answer

The answer of Table 24-16
The table below lists annual consumer...

Question 11

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Accepted Answer

A) True 
 B)False

Question 12

Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

Accepted Answer

A) True 
 B)False

Question 13

In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007?

Accepted Answer

A)  $0.83 
B)  $2.25 
C)  $2.50 
D)  $3.00 
A)  $0.83 
B)  $2.25 
C)  $2.50 
D)  $3.00

Question 14

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 15

Suppose a basket of goods and services has been selected to calculate the consumer price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in 2007, it cost $168.75. Which of the following statements is correct?

Accepted Answer

A)  Using 2005 as the base year, the economy's inflation rate was higher in 2007 than it was in 2006. 
B)  If 2007 is the base year, then the CPI is 33.75 in 2006. 
C)  If the CPI is 156.25 in 2007, then 2005 is the base year. 
D)  Using 2005 as the base year, the economy's inflation rate for 2006 was 27 percent. 
A)  Using 2005 as the base year, the economy's inflation rate was higher in 2007 than it was in 2006. 
B)  If 2007 is the base year, then the CPI is 33.75 in 2006. 
C)  If the CPI is 156.25 in 2007, then 2005 is the base year. 
D)  Using 2005 as the base year, the economy's inflation rate for 2006 was 27 percent.

Question 16

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 17

The value of the consumer price index increased from 140 to 147 during 2006. Nathan opened a bank account at the beginning of 2006, and at the end of 2006 his account balance was $12,840. The purchasing power of Nathan's account increased by 2 percent during the year. We can conclude that Nathan opened his account with a deposit of $11,500 at the beginning of 2006.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that

Accepted Answer

A)  the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 2 percent. 
B)  the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 8 percent. 
C)  the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 2 percent. 
D)  the dollar value of savings increased at 8 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 2 percent. 
B)  the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 8 percent. 
C)  the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 2 percent. 
D)  the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 5 percent.

Question 19

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 20

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

Accepted Answer

A) True 
 B)False

Exam 24: Measuring the Cost of Living

If the CPI was 108.00 in 1942 and is 336.96 today, then $10 in 1942 purchased the same amount of goods and services as

Suppose a basket of goods and services has been selected to calculate the CPI. In 2002, the basket's cost was $80; in 2008, the basket's cost was $92; and in 2010, the basket's cost was $108. The base year must be

Which of the following is not an example of a price index computed by the Bureau of Labor Statistics?

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

With respect to the consumer price index, which of the following does not serve as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

The CPI and the GDP deflator

If the current year CPI is 90, then the price level has decreased 10 percent since the base year.

Categories of U.S. consumer spending, ranked from largest to smallest, are

Table 24-16 The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year. -Refer to Table 24-16. Calculate the missing value that belongs in space C.

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

A COLA automatically raises the wage when

Suppose a basket of goods and services has been selected to calculate the consumer price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in 2007, it cost $168.75. Which of the following statements is correct?

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

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that

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

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

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

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