Exam 24: Measuring the Cost of Living

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. In real terms, Josh Holloway's income amounts to about what percentage of Sue Holloway's income?

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 2011 as the base year, what is the inflation rate in 2011?

From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the inflation rate for medical care?

John just graduated law school and has two competing job offers. The first is in Phoenix and pays a salary of $150,000. He has a similar job offer in Cleveland that pays $90,000. Which pair of CPIs would make the two salaries have the same purchasing power?

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

The basket of goods in the consumer price index changes

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is

The Bureau of Labor Statistics does not try to account for quality changes in the goods and services in the basket used to compute the CPI.

The content of the basket of goods and services used to compute the CPI changes every month.

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $58. The value of the CPI in 2016 was

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Suppose the consumer price index was 184 in 2009 and 198.17 in 2010. The nominal interest rate during this period was 5.8 percent. What was the real interest rate during this period?

In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. President Hoover's 1931 salary was equivalent to a 2012 salary of about

Suppose that the price of one gallon of milk was $0.25 in 1950, that the CPI in 1950 was 25, and that in 2000 the CPI was 200.What is the price of a 1950 gallon of milk in 2000 dollars?

Suppose that the prices of dairy products have risen relatively less than prices in general over the last several years. To which problem in the construction of the CPI is this situation most relevant?

If the nominal interest rate is 9 percent and the real interest rate is 3 percent, then the inflation rate is

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Table 24-11. Megan's salary for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-11. The nominal interest rate for 2012 is

Which of the following agencies calculates the CPI?

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Suppose Will's 2009 food expenditures in 2011 dollars amounted to $5,670. Suppose also that the real interest rate in 2011 was 3 percent. Then, in 2011,