Question 1

What measure reflects the overall cost of goods and services produced domestically?

Accepted Answer

The answer of What measure reflects the overall cost of...

Question 2

In 1954, Mickey Mantle earned $21,000 playing for the New York Yankees. The CPI in 1954 was 26.9, and the CPI in 2010 was 218.06. What is Mickey Mantle's 1954 salary in 2010 dollars?

Accepted Answer

Mickey Mantle's 1954

Question 3

Which of the following statements is correct?

Accepted Answer

A)  In order to calculate the inflation rate for the year 2011, we need to know the values of the consumer price index for the years 2009, 2010, and 2011. 
B)  Changes in the consumer price index are often thought to be useful in predicting changes in the producer price index. 
C)  Despite its name, the "consumer price index" really measures the overall cost of the goods and services bought by consumers, business firms, and units of government. 
D)  If the prices of all goods and services changed proportionately over time, then the consumer price index would reflect no substitution bias. 
A)  In order to calculate the inflation rate for the year 2011, we need to know the values of the consumer price index for the years 2009, 2010, and 2011. 
B)  Changes in the consumer price index are often thought to be useful in predicting changes in the producer price index. 
C)  Despite its name, the "consumer price index" really measures the overall cost of the goods and services bought by consumers, business firms, and units of government. 
D)  If the prices of all goods and services changed proportionately over time, then the consumer price index would reflect no substitution bias.

Question 4

The producer price index measures the cost of a basket of goods and services

Accepted Answer

A)  typically produced in the economy. 
B)  produced for a typical consumer. 
C)  sold by producers. 
D)  bought by firms. 
A)  typically produced in the economy. 
B)  produced for a typical consumer. 
C)  sold by producers. 
D)  bought by firms.

Question 5

Data from the Bureau of Labor Statistics show that consumer spending on medical care is about equal to consumer spending on recreation and consumer spending on education and communication.

Accepted Answer

A) True 
 B)False

Question 6

If the CPI was 110 this year and 100 last year, then

Accepted Answer

A)  the cost of the CPI basket of goods and services increased by 10 percent this year. 
B)  the price level increased by 110 percent this year. 
C)  the inflation rate for this year was 10 percent higher than the inflation rate for last year. 
D)  All of the above are correct. 
A)  the cost of the CPI basket of goods and services increased by 10 percent this year. 
B)  the price level increased by 110 percent this year. 
C)  the inflation rate for this year was 10 percent higher than the inflation rate for last year. 
D)  All of the above are correct.

Question 7

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Accepted Answer

A)  Economists agree that the bias in the CPI is a very serious problem. 
B)  Economists agree that the bias in the CPI is not a serious problem. 
C)  Economists agree on the severity of the CPI bias, but there is still debate on what to do about it. 
D)  There is still debate among economists on the severity of the CPI bias and what to do about it. 
A)  Economists agree that the bias in the CPI is a very serious problem. 
B)  Economists agree that the bias in the CPI is not a serious problem. 
C)  Economists agree on the severity of the CPI bias, but there is still debate on what to do about it. 
D)  There is still debate among economists on the severity of the CPI bias and what to do about it.

Question 8

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about

Accepted Answer

A)  $40,000. 
B)  $44,100. 
C)  $37,838. 
D)  $40,091. 
A)  $40,000. 
B)  $44,100. 
C)  $37,838. 
D)  $40,091.

Question 9

The CPI differs from the GDP deflator in that

Accepted Answer

A)  the CPI is a price index, while the GDP deflator is an inflation index. 
B)  substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator. 
C)  increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator. 
D)  increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator. 
A)  the CPI is a price index, while the GDP deflator is an inflation index. 
B)  substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator. 
C)  increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator. 
D)  increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator.

Question 10

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called

Accepted Answer

A)  price-change neglect. 
B)  unmeasured quality change. 
C)  substitution bias. 
D)  relative bias. 
A)  price-change neglect. 
B)  unmeasured quality change. 
C)  substitution bias. 
D)  relative bias.

Question 11

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's 2006 salary in 2001 dollars is

Accepted Answer

A)  $20,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
B)  $20,000; thus, Ruben's purchasing power decreased between 2001 and 2006. 
C)  $64,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
D)  $64,000; thus, Ruben's purchasing power decreased between 2001 and 2006. 
A)  $20,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
B)  $20,000; thus, Ruben's purchasing power decreased between 2001 and 2006. 
C)  $64,000; thus, Ruben's purchasing power increased between 2001 and 2006. 
D)  $64,000; thus, Ruben's purchasing power decreased between 2001 and 2006.

Question 12

You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in 1962 prices?

Accepted Answer

A)  sixty cents × (today's CPI - 1962 CPI) 
B)  sixty cents × (1962 CPI - today's CPI) 
C)  sixty cents × (today's CPI / 1962 CPI) 
D)  sixty cents × (1962 CPI / today's CPI) 
A)  sixty cents × (today's CPI - 1962 CPI) 
B)  sixty cents × (1962 CPI - today's CPI) 
C)  sixty cents × (today's CPI / 1962 CPI) 
D)  sixty cents × (1962 CPI / today's CPI)

Question 13

The CPI is calculated

Accepted Answer

A)  monthly by the Department of Commerce. 
B)  monthly by the Bureau of Labor Statistics. 
C)  quarterly by the Department of Commerce. 
D)  quarterly by the Bureau of Labor Statistics. 
A)  monthly by the Department of Commerce. 
B)  monthly by the Bureau of Labor Statistics. 
C)  quarterly by the Department of Commerce. 
D)  quarterly by the Bureau of Labor Statistics.

Question 14

Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn.  
-Refer to Table 24-3. If 2013 is the base year, then the inflation rate in 2013 was

Accepted Answer

A)  24.7 percent. 
B)  54.0 percent. 
C)  32.8 percent. 
D)  38.0 percent. 
A)  24.7 percent. 
B)  54.0 percent. 
C)  32.8 percent. 
D)  38.0 percent.

Question 15

Table 24-10
The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats.  
-Refer to Table 24-10. The inflation rate was

Accepted Answer

A)  10.03 percent in 2009 and 17.43 percent in 2010. 
B)  17.00 percent in 2009 and 32.50 percent in 2010. 
C)  10.03 percent in 2009 and 29.20 percent in 2010. 
D)  17.00 percent in 2009 and 29.20 percent in 2010. 
A)  10.03 percent in 2009 and 17.43 percent in 2010. 
B)  17.00 percent in 2009 and 32.50 percent in 2010. 
C)  10.03 percent in 2009 and 29.20 percent in 2010. 
D)  17.00 percent in 2009 and 29.20 percent in 2010.

Question 16

Consternation Corporation has an agreement with its workers to index completely the wage of its employees using the CPI. Consternation Corporation currently pays its production line workers $7.50 an hour and is scheduled to index their wages today. If the CPI is currently 130 and was 125 a year ago, the firm should increase the hourly wages of its workers by

Accepted Answer

A)  $0.04. 
B)  $0.29. 
C)  $0.30. 
D)  $0.50. 
A)  $0.04. 
B)  $0.29. 
C)  $0.30. 
D)  $0.50.

Question 17

In 1972, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost $6.00, then which pair of CPIs would make the cost in today's dollars the same for both years?

Accepted Answer

A)  60 in 1972 and 150 today 
B)  65 in 1972 and 156 today 
C)  75 in 1972 and 160 today 
D)  90 in 1972 and 145.8 today 
A)  60 in 1972 and 150 today 
B)  65 in 1972 and 156 today 
C)  75 in 1972 and 160 today 
D)  90 in 1972 and 145.8 today

Question 18

Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn.  
-Refer to Table 24-3. If 2013 is the base year, then the CPI for 2012 was

Accepted Answer

A)  75.3. 
B)  100.0. 
C)  116.0. 
D)  132.8. 
A)  75.3. 
B)  100.0. 
C)  116.0. 
D)  132.8.

Question 19

The U.S. income tax system is completely indexed for inflation.

Accepted Answer

A) True 
 B)False

Question 20

In general, if a consumer good is produced domestically and consumed domestically, an increase in its price will have which of the following effects?

Accepted Answer

A)  The consumer price index will increase relatively more than will the GDP deflator. 
B)  The consumer price index and the GDP deflator will increase by the same amount. 
C)  The consumer price index will increase relatively less than will the GDP deflator. 
D)  One cannot generalize about the increase in the consumer price index relative to the increase in the GDP deflator. 
A)  The consumer price index will increase relatively more than will the GDP deflator. 
B)  The consumer price index and the GDP deflator will increase by the same amount. 
C)  The consumer price index will increase relatively less than will the GDP deflator. 
D)  One cannot generalize about the increase in the consumer price index relative to the increase in the GDP deflator.

Exam 24: Measuring the Cost of Living

What measure reflects the overall cost of goods and services produced domestically?

In 1954, Mickey Mantle earned $21,000 playing for the New York Yankees. The CPI in 1954 was 26.9, and the CPI in 2010 was 218.06. What is Mickey Mantle's 1954 salary in 2010 dollars?

Which of the following statements is correct?

The producer price index measures the cost of a basket of goods and services

Data from the Bureau of Labor Statistics show that consumer spending on medical care is about equal to consumer spending on recreation and consumer spending on education and communication.

If the CPI was 110 this year and 100 last year, then

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about

The CPI differs from the GDP deflator in that

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's 2006 salary in 2001 dollars is

You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in 1962 prices?

The CPI is calculated

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. If 2013 is the base year, then the inflation rate in 2013 was

Table 24-10 The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats. -Refer to Table 24-10. The inflation rate was

In 1972, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost $6.00, then which pair of CPIs would make the cost in today's dollars the same for both years?

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. If 2013 is the base year, then the CPI for 2012 was

The U.S. income tax system is completely indexed for inflation.

In general, if a consumer good is produced domestically and consumed domestically, an increase in its price will have which of the following effects?

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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