Question 1

In the basket of goods that is used to compute the consumer price index, the three largest categories of consumer spending are

Accepted Answer

A)  housing, transportation, and recreation. 
B)  housing, transportation, and food & beverages. 
C)  housing, food & beverages, and education & communication. 
D)  housing, medical care, and education & communication. 
A)  housing, transportation, and recreation. 
B)  housing, transportation, and food & beverages. 
C)  housing, food & beverages, and education & communication. 
D)  housing, medical care, and education & communication.

Question 2

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. Suppose the consumer price index for 2013 is not necessarily 235. Then Megan's 2013 salary represents more purchasing power than her 2011 salary as long as the consumer price index for 2013 is

Accepted Answer

A)  greater than 264.25. 
B)  less than 264.25. 
C)  greater than 258.71. 
D)  less than 258.71. 
A)  greater than 264.25. 
B)  less than 264.25. 
C)  greater than 258.71. 
D)  less than 258.71.

Question 3

Which of the following statements about real and nominal interest rates is correct?

Accepted Answer

A)  Real interest rates can be either positive or negative, but nominal interest rates must be positive. 
B)  Real interest rates and nominal interest rates must be positive. 
C)  Real interest rates must be positive, but nominal interest rates can be either positive or negative. 
D)  Real interest rates and nominal interest rates can be either positive or negative. 
A)  Real interest rates can be either positive or negative, but nominal interest rates must be positive. 
B)  Real interest rates and nominal interest rates must be positive. 
C)  Real interest rates must be positive, but nominal interest rates can be either positive or negative. 
D)  Real interest rates and nominal interest rates can be either positive or negative.

Question 4

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

Accepted Answer

The inflat

Question 5

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

Accepted Answer

A)  -5 percent. 
B)  1.67 percent. 
C)  5 percent. 
D)  11 percent. 
A)  -5 percent. 
B)  1.67 percent. 
C)  5 percent. 
D)  11 percent.

Question 6

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.  
-Refer to Table 24-7. If the base year is 2009, then the economy's inflation rate in 2010 is

Accepted Answer

A)  8 percent. 
B)  10 percent. 
C)  10.91 percent. 
D)  11.11 percent. 
A)  8 percent. 
B)  10 percent. 
C)  10.91 percent. 
D)  11.11 percent.

Question 7

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. If the nominal interest rate was 8 percent in 2010, then

Accepted Answer

A)  the real interest rate in 2010 was 3 percent. 
B)  the real interest rate in 2010 was 4 percent. 
C)  Will's 2009 food expenditures in 2010 dollars amount to $5,800. 
D)  Will's 2009 food expenditures in 2011 dollars amount to $6,200. 
A)  the real interest rate in 2010 was 3 percent. 
B)  the real interest rate in 2010 was 4 percent. 
C)  Will's 2009 food expenditures in 2010 dollars amount to $5,800. 
D)  Will's 2009 food expenditures in 2011 dollars amount to $6,200.

Question 8

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 2012 is the base year, then the CPI for 2013 was

Accepted Answer

A)  100.0. 
B)  116.0. 
C)  132.8. 
D)  154.0. 
A)  100.0. 
B)  116.0. 
C)  132.8. 
D)  154.0.

Question 9

Accepted Answer

A) True 
 B)False

Question 10

The economy's inflation rate is the

Accepted Answer

A)  price level in the current period. 
B)  change in the price level from the previous period. 
C)  change in the gross domestic product from the previous period. 
D)  percentage change in the price level from the previous period. 
A)  price level in the current period. 
B)  change in the price level from the previous period. 
C)  change in the gross domestic product from the previous period. 
D)  percentage change in the price level from the previous period.

Question 11

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

Accepted Answer

A)  more cola and more mints. 
B)  more cola and fewer mints. 
C)  less cola and more mints. 
D)  less cola and fewer mints. 
A)  more cola and more mints. 
B)  more cola and fewer mints. 
C)  less cola and more mints. 
D)  less cola and fewer mints.

Question 12

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 2013 is the base year, then the CPI for 2012 was

Accepted Answer

A)  95.7. 
B)  100.0. 
C)  90.0. 
D)  213.6. 
A)  95.7. 
B)  100.0. 
C)  90.0. 
D)  213.6.

Question 13

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Accepted Answer

A) True 
 B)False

Question 14

Of Social Security benefits and federal income tax brackets, which is indexed?

Accepted Answer

A)  Both are indexed. 
B)  Only Social Security benefits are indexed. 
C)  Only federal income tax brackets are indexed. 
D)  Neither is indexed. 
A)  Both are indexed. 
B)  Only Social Security benefits are indexed. 
C)  Only federal income tax brackets are indexed. 
D)  Neither is indexed.

Question 15

The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?

Accepted Answer

A)  5.0 percent 
B)  6.0 percent 
C)  7.2 percent 
D)  105 percent 
A)  5.0 percent 
B)  6.0 percent 
C)  7.2 percent 
D)  105 percent

Question 16

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. If the base year is 2013, then the consumer price index was

Accepted Answer

A)  80 in 2013, 100 in 2014, and 60 in 2015. 
B)  100 in 2013, 300 in 2014, and -100 in 2015. 
C)  180 in 2013, 200 in 2014, and 160 in 2015. 
D)  100 in 2013, 111.1 in 2014, and 88.9 in 2015. 
A)  80 in 2013, 100 in 2014, and 60 in 2015. 
B)  100 in 2013, 300 in 2014, and -100 in 2015. 
C)  180 in 2013, 200 in 2014, and 160 in 2015. 
D)  100 in 2013, 111.1 in 2014, and 88.9 in 2015.

Question 17

If the nominal interest rate is 4.2 percent and the rate of inflation is -0.5 percent, then the real interest rate is

Accepted Answer

A)  -8.4 percent. 
B)  -2.1 percent. 
C)  3.7 percent. 
D)  4.7 percent. 
A)  -8.4 percent. 
B)  -2.1 percent. 
C)  3.7 percent. 
D)  4.7 percent.

Question 18

For purposes of calculating the CPI, the food & beverages category of consumer spending includes the cost of

Accepted Answer

A)  food away from home. 
B)  alcoholic beverages. 
C)  both food away from home and alcoholic beverages. 
D)  neither food away from home nor alcoholic beverages because these are included in the recreation category of consumer spending. 
A)  food away from home. 
B)  alcoholic beverages. 
C)  both food away from home and alcoholic beverages. 
D)  neither food away from home nor alcoholic beverages because these are included in the recreation category of consumer spending.

Question 19

The Bureau of Labor Statistics surveys consumers to determine a fixed basket of goods.

Accepted Answer

A) True 
 B)False

Question 20

In a simple economy, people consume only 2 goods, food and clothing. The market basket of goods used to compute the CPI consists of 50 units of food and 10 units of clothing.   
a. What are the percentage increases in the price of food and in the price of clothing?
b. What is the percentage increase in the CPI?
c. Do these price changes affect all consumers to the same extent? Explain.

Accepted Answer

a. The price of food increased by 50 per

Exam 24: Measuring the Cost of Living

In the basket of goods that is used to compute the consumer price index, the three largest categories of consumer spending are

Which of the following statements about real and nominal interest rates is correct?

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 24-7. If the base year is 2009, then the economy's inflation rate in 2010 is

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. If the nominal interest rate was 8 percent in 2010, then

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 2012 is the base year, then the CPI for 2013 was

The economy's inflation rate is the

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

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 2013 is the base year, then the CPI for 2012 was

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Of Social Security benefits and federal income tax brackets, which is indexed?

The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?

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. If the base year is 2013, then the consumer price index was

If the nominal interest rate is 4.2 percent and the rate of inflation is -0.5 percent, then the real interest rate is

For purposes of calculating the CPI, the food & beverages category of consumer spending includes the cost of

The Bureau of Labor Statistics surveys consumers to determine a fixed basket of goods.

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

Filters