Question 1

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.

Accepted Answer

A) True 
 B)False

Question 2

Several studies in the 1990s concluded that the consumer price index overstated inflation by about

Accepted Answer

A)  3 percentage points per year, and that number of percentage points likely still applies now. 
B)  3 percentage points per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 3 percentage points. 
C)  1 percentage point per year, and that number of percentage points likely still applies now. 
D)  1 percentage point per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 1 percentage point 
A)  3 percentage points per year, and that number of percentage points likely still applies now. 
B)  3 percentage points per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 3 percentage points. 
C)  1 percentage point per year, and that number of percentage points likely still applies now. 
D)  1 percentage point per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 1 percentage point

Question 3

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. Josh Holloway's 2013 income in 1944 dollars is

Accepted Answer

A)  $11,528. 
B)  $16,923. 
C)  $149,009. 
D)  $26,059. 
A)  $11,528. 
B)  $16,923. 
C)  $149,009. 
D)  $26,059.

Question 4

A COLA automatically raises the wage when the CPI rises.

Accepted Answer

A) True 
 B)False

Question 5

In the late 1970s, U.S. nominal interest rates were high and real interest rates were low, but in the late 1990s, U.S. nominal interest rates were low and real interest rates were high.

Accepted Answer

A) True 
 B)False

Question 6

If the cost of transportation increases by 20 percent, then, other things the same, the CPI is likely to increase by about

Accepted Answer

A)  0.3 percent. 
B)  1.7 percent. 
C)  3.4 percent. 
D)  10 percent. 
A)  0.3 percent. 
B)  1.7 percent. 
C)  3.4 percent. 
D)  10 percent.

Question 7

Suppose the Tooth Fairy paid 50 cents for a tooth in 1970. The CPI in 1970 was 38.8, while the CPI in 2010 was 218.1. What is the value of the Tooth Fairy's payment in 2010 dollars?

Accepted Answer

The answer of Suppose the Tooth Fairy paid 50 cents...

Question 8

A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods. BLS attempts to account for this change in the market basket by

Accepted Answer

A)  dropping the good from the basket. 
B)  substituting in a different vehicle with the same horsepower as the 2008 model. 
C)  adjusting the share of the market basket allocated to transportation. 
D)  adjusting the price of the good to account for the quality change. 
A)  dropping the good from the basket. 
B)  substituting in a different vehicle with the same horsepower as the 2008 model. 
C)  adjusting the share of the market basket allocated to transportation. 
D)  adjusting the price of the good to account for the quality change.

Question 9

If the price of beef rises and consumers buy more chicken and less beef, what kind of bias does the consumer price index exhibit?

Accepted Answer

The answer of If the price of beef rises and...

Question 10

Which of the following is not correct?

Accepted Answer

A)  The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. 
B)  The consumer price index is used to monitor changes in the cost of living over time. 
C)  The consumer price index is used by economists to measure the inflation rate. 
D)  The consumer price index is used to measure the quantity of goods and services that the economy is producing. 
A)  The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. 
B)  The consumer price index is used to monitor changes in the cost of living over time. 
C)  The consumer price index is used by economists to measure the inflation rate. 
D)  The consumer price index is used to measure the quantity of goods and services that the economy is producing.

Question 11

Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Accepted Answer

A)  the number of apples bought by the typical consumer is equal to the number of pears bought by the typical consumer in each year. 
B)  neither the number of apples nor the number of pears bought by the typical consumer changes from year to year. 
C)  the percentage change in the price of apples is equal to the percentage change in the price of pears from year to year. 
D)  neither the price of apples nor the price of pears changes from year to year. 
A)  the number of apples bought by the typical consumer is equal to the number of pears bought by the typical consumer in each year. 
B)  neither the number of apples nor the number of pears bought by the typical consumer changes from year to year. 
C)  the percentage change in the price of apples is equal to the percentage change in the price of pears from year to year. 
D)  neither the price of apples nor the price of pears changes from year to year.

Question 12

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was

Accepted Answer

A)  100 in 2012. 
B)  105 in 2013. 
C)  109.5 in 2014. 
D)  All of the above are correct. 
A)  100 in 2012. 
B)  105 in 2013. 
C)  109.5 in 2014. 
D)  All of the above are correct.

Question 13

What basket of goods and services is used to construct the CPI?

Accepted Answer

A)  a random sample of all goods and services produced in the economy 
B)  the goods and services that are typically bought by consumers as determined by government surveys 
C)  only food, clothing, transportation, entertainment, and education 
D)  the least expensive and the most expensive goods and services in each major category of consumer expenditures 
A)  a random sample of all goods and services produced in the economy 
B)  the goods and services that are typically bought by consumers as determined by government surveys 
C)  only food, clothing, transportation, entertainment, and education 
D)  the least expensive and the most expensive goods and services in each major category of consumer expenditures

Question 14

The Bureau of Labor Statistics determines which prices are most important to the typical consumer by surveying consumers.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Suppose the typical basket for the calculation of the CPI includes one computer. Since computers have gotten better over time as a result of technological change, what problem does this create for calculating the CPI?

Accepted Answer

The improvement in t

Question 17

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 consumer price index for February and March.

Accepted Answer

85 in Febr

Question 18

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, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

Accepted Answer

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

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 D?

Accepted Answer

A)  12% 
B)  154 
C)  40% 
D)  15% 
A)  12% 
B)  154 
C)  40% 
D)  15%

Question 20

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

Exam 24: Measuring the Cost of Living

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.

Several studies in the 1990s concluded that the consumer price index overstated inflation by about

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. Josh Holloway's 2013 income in 1944 dollars is

A COLA automatically raises the wage when the CPI rises.

In the late 1970s, U.S. nominal interest rates were high and real interest rates were low, but in the late 1990s, U.S. nominal interest rates were low and real interest rates were high.

If the cost of transportation increases by 20 percent, then, other things the same, the CPI is likely to increase by about

Suppose the Tooth Fairy paid 50 cents for a tooth in 1970. The CPI in 1970 was 38.8, while the CPI in 2010 was 218.1. What is the value of the Tooth Fairy's payment in 2010 dollars?

A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods. BLS attempts to account for this change in the market basket by

If the price of beef rises and consumers buy more chicken and less beef, what kind of bias does the consumer price index exhibit?

Which of the following is not correct?

Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was

What basket of goods and services is used to construct the CPI?

The Bureau of Labor Statistics determines which prices are most important to the typical consumer by surveying consumers.

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 typical basket for the calculation of the CPI includes one computer. Since computers have gotten better over time as a result of technological change, what problem does this create for calculating the CPI?

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, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

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 D?

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.

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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