Question 1

Which of the following is correct?

Accepted Answer

A)  Nominal and real interest rates always move together. 
B)  Nominal and real interest rates never move together. 
C)  Nominal and real interest rates do not always move together. 
D)  Nominal and real interest rates always move in opposite directions. 
A)  Nominal and real interest rates always move together. 
B)  Nominal and real interest rates never move together. 
C)  Nominal and real interest rates do not always move together. 
D)  Nominal and real interest rates always move in opposite directions.

Question 2

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

Accepted Answer

A)  151.4 
B)  81.4 
C)  55.1 
D)  122.9 
A)  151.4 
B)  81.4 
C)  55.1 
D)  122.9

Question 3

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. The Wrexington salary in Charlieville dollars is

Accepted Answer

A)  $30,000.00. 
B)  $33,333.33. 
C)  $45,000.00 
D)  $83,333.33. 
A)  $30,000.00. 
B)  $33,333.33. 
C)  $45,000.00 
D)  $83,333.33.

Question 4

Table 24-15
The table below lists the prices of chips and salsa for the months of October, November, and December. Assume that the typical consumer buys 8 bags of chips and 4 jars of salsa each month, and that October is the base period.  
-Refer to Table 24-15. Calculate the inflation rate for December.

Accepted Answer

The answer of Table 24-15
The table below lists the prices...

Question 5

It is possible to observe a positive nominal interest rate together with a negative real interest rate.

Accepted Answer

A) True 
 B)False

Question 6

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 7

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the largest?

Accepted Answer

A)  education & communication 
B)  recreation 
C)  medical care 
D)  All of the above categories are about equal in magnitude. 
A)  education & communication 
B)  recreation 
C)  medical care 
D)  All of the above categories are about equal in magnitude.

Question 8

When the overall level of prices in the economy is increasing, economists say that the economy is experiencing

Accepted Answer

A)  economic growth. 
B)  stagflation. 
C)  inflation. 
D)  deflation. 
A)  economic growth. 
B)  stagflation. 
C)  inflation. 
D)  deflation.

Question 9

In the United States, nominal interest rates were

Accepted Answer

A)  high in the 1970s and 1990s. 
B)  low in the 1970s and 1990s. 
C)  high in the 1970s and low in the 1990s. 
D)  low in the 1970s and high in the 1990s. 
A)  high in the 1970s and 1990s. 
B)  low in the 1970s and 1990s. 
C)  high in the 1970s and low in the 1990s. 
D)  low in the 1970s and high in the 1990s.

Question 10

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

Accepted Answer

A)  The two measures are constructed differently, but they always indicate the same inflation rate. 
B)  The substitution bias applies equally to both measures. 
C)  A change in the price of Korean televisions is reflected in the U.S. consumer price index but not in the U.S. GDP deflator. 
D)  All of the above are correct. 
A)  The two measures are constructed differently, but they always indicate the same inflation rate. 
B)  The substitution bias applies equally to both measures. 
C)  A change in the price of Korean televisions is reflected in the U.S. consumer price index but not in the U.S. GDP deflator. 
D)  All of the above are correct.

Question 11

With respect to the consumer price index, which of the following serves 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)  falls from $0.90 to $0.72 while the price of a loaf of bread falls from $2.00 to $1.60. 
C)  remains constant, as does the price of a loaf of bread. 
D)  None of the above serves as an example of how the substitution bias arises. 
A)  rises from $0.80 to $1.00 while the price of a loaf of bread rises from $2.00 to $2.50. 
B)  falls from $0.90 to $0.72 while the price of a loaf of bread falls from $2.00 to $1.60. 
C)  remains constant, as does the price of a loaf of bread. 
D)  None of the above serves as an example of how the substitution bias arises.

Question 12

Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will

Accepted Answer

A)  increase less than will the consumer price index. 
B)  increase more than will the consumer price index. 
C)  not increase, but the consumer price index will increase. 
D)  increase, but the consumer price index will not increase. 
A)  increase less than will the consumer price index. 
B)  increase more than will the consumer price index. 
C)  not increase, but the consumer price index will increase. 
D)  increase, but the consumer price index will not increase.

Question 13

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

Accepted Answer

A)  $5,296. 
B)  $1,128,421 
C)  $1,208,421 
D)  $17,152,000 
A)  $5,296. 
B)  $1,128,421 
C)  $1,208,421 
D)  $17,152,000

Question 14

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

Accepted Answer

A)  $39,333.33. 
B)  $74,000.00. 
C)  $89,333.33. 
D)  $63,559.32. 
A)  $39,333.33. 
B)  $74,000.00. 
C)  $89,333.33. 
D)  $63,559.32.

Question 15

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. The cost of the basket

Accepted Answer

A)  increased from 2013 to 2014 and increased from 2014 to 2015. 
B)  increased from 2013 to 2014 and decreased from 2014 to 2015. 
C)  decreased from 2013 to 2014 and increased from 2014 to 2015. 
D)  decreased from 2013 to 2014 and decreased from 2014 to 2015. 
A)  increased from 2013 to 2014 and increased from 2014 to 2015. 
B)  increased from 2013 to 2014 and decreased from 2014 to 2015. 
C)  decreased from 2013 to 2014 and increased from 2014 to 2015. 
D)  decreased from 2013 to 2014 and decreased from 2014 to 2015.

Question 16

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players, we find that the current median salary of today's Yankees is

Accepted Answer

A)  about three quarters of Ruth's salary. 
B)  about the same as Ruth's salary. 
C)  about twice Ruth's salary. 
D)  more than four times Ruth's salary. 
A)  about three quarters of Ruth's salary. 
B)  about the same as Ruth's salary. 
C)  about twice Ruth's salary. 
D)  more than four times Ruth's salary.

Question 17

Table 24-6
The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.  
-Refer to Table 24-6. If the base year is 2010, then the economy's inflation rate in 2010 was

Accepted Answer

A)  10.5 percent. 
B)  15.0 percent. 
C)  20.0 percent. 
D)  25.00 percent. 
A)  10.5 percent. 
B)  15.0 percent. 
C)  20.0 percent. 
D)  25.00 percent.

Question 18

In 1979 and 1980,

Accepted Answer

A)  the U.S. inflation rate as measured by the GDP deflator was higher than that measured by the CPI, and the difference was explained by rapidly rising prices of goods exported by the U.S. 
B)  the U.S. inflation rate as measured by the CPI was higher than that measured by the GDP deflator, and the difference was explained by rapidly rising prices of goods exported by the U.S. 
C)  the U.S. inflation rate as measured by the GDP deflator was higher than that measured by the CPI, and the difference was explained by rapidly rising oil prices. 
D)  the U.S. inflation rate as measured by the CPI was higher than that measured by the GDP deflator, and the difference was explained by rapidly rising oil prices. 
A)  the U.S. inflation rate as measured by the GDP deflator was higher than that measured by the CPI, and the difference was explained by rapidly rising prices of goods exported by the U.S. 
B)  the U.S. inflation rate as measured by the CPI was higher than that measured by the GDP deflator, and the difference was explained by rapidly rising prices of goods exported by the U.S. 
C)  the U.S. inflation rate as measured by the GDP deflator was higher than that measured by the CPI, and the difference was explained by rapidly rising oil prices. 
D)  the U.S. inflation rate as measured by the CPI was higher than that measured by the GDP deflator, and the difference was explained by rapidly rising oil prices.

Question 19

Michael Jordan's rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9, while the CPI in 2010 was 218.1. What is Michael Jordan's rookie salary in 2010 dollars?

Accepted Answer

The answer of Michael Jordan's rookie salary in 1984 was...

Question 20

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.

Accepted Answer

A) True 
 B)False

Exam 24: Measuring the Cost of Living

Which of the following is correct?

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

It is possible to observe a positive nominal interest rate together with a negative real interest rate.

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

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the largest?

When the overall level of prices in the economy is increasing, economists say that the economy is experiencing

In the United States, nominal interest rates were

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

With respect to the consumer price index, which of the following serves as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

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. The cost of the basket

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players, we find that the current median salary of today's Yankees is

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. If the base year is 2010, then the economy's inflation rate in 2010 was

In 1979 and 1980,

Michael Jordan's rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9, while the CPI in 2010 was 218.1. What is Michael Jordan's rookie salary in 2010 dollars?

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.

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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