Exam 24: Measuring the Cost of Living

Table 24-13. Olivia's expenditures on clothing for three consecutive years, along with some values for the CPI, are presented in the table below. -Refer to Table 24-13. Suppose Olivia's 2009 clothing expenditure in 2010 dollars amounts to $1,440. Then X, the consumer price index for 2009, has a value of

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

In an imaginary economy, consumers buy only razors and cologne. The fixed basket consists of 6 razors and 4 bottles of cologne. A razor cost $20 in 2009 and $25 in 2010. A bottle of cologne cost $30 in 2009 and $40 in 2010. Using 2009 as the base year, which of the following statements is correct?

A decrease in the price of large tractors imported into the United States from Russia

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?

The GDP Deflator reflects

Scenario 24-5 Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-5. Using 2009 as the base year, what is the inflation rate in 2010?

If the cost of apparel increases by 50 percent, then, other things the same, the CPI is likely to increase by about

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 cost of a basket of goods for each month.

Suppose the price index was 110 in 2004, 120 in 2005, and 125 in 2006. Which of the following statements is correct?

The primary purpose of measuring the overall level of prices in the economy is to

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.

Which of the following is not correct?

The U.S. economy has never experienced deflation.

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

If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was

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 inflation rate in 2007 was 16 percent, then how much did a magazine cost in 2007?

Which of these events would cause the consumer price index to overstate the increase in the cost of living?