Question 1

The nominal wage rate is the

Accepted Answer

A) minimum hourly wage that a company can legally pay a worker. 
B) average hourly wage rate measured in the dollars of a given reference base year. 
C) minimum hourly wage rate measured in the dollars of a given reference base year. 
D) average hourly wage rate measured in current dollars. 
E) wage rate after inflation has been adjusted out of it. 
A) minimum hourly wage that a company can legally pay a worker. 
B) average hourly wage rate measured in the dollars of a given reference base year. 
C) minimum hourly wage rate measured in the dollars of a given reference base year. 
D) average hourly wage rate measured in current dollars. 
E) wage rate after inflation has been adjusted out of it.

Question 2

Which of the following formulas would you use to calculate the nominal wage rate?

Accepted Answer

A) nominal wage rate = real wage rate ÷ CPI 
B) nominal wage rate = real wage rate × CPI 
C) nominal wage rate = (real wage rate × CPI)÷ 100 
D) nominal wage rate = (real wage rate × CPI)× 100 
E) nominal wage rate = (real wage rate ÷ CPI)× 100 
A) nominal wage rate = real wage rate ÷ CPI 
B) nominal wage rate = real wage rate × CPI 
C) nominal wage rate = (real wage rate × CPI)÷ 100 
D) nominal wage rate = (real wage rate × CPI)× 100 
E) nominal wage rate = (real wage rate ÷ CPI)× 100

Question 3

Because a third of government outlays are linked directly to the CPI,as time passes,the CPI bias means that the government's outlays are

Accepted Answer

A) larger than needed to keep pace with the cost of living. 
B) smaller than needed to keep pace with the cost of living. 
C) exactly equal to the changes in the cost of living. 
D) larger than needed to keep pace with the cost of living if the CPI is falling from one year to the next,otherwise the outlays are smaller than needed to keep pace with the cost of living. 
E) smaller than needed to keep pace with the cost of living if the CPI is falling from one year to the next,otherwise the outlays are larger than needed to keep pace with the cost of living. 
A) larger than needed to keep pace with the cost of living. 
B) smaller than needed to keep pace with the cost of living. 
C) exactly equal to the changes in the cost of living. 
D) larger than needed to keep pace with the cost of living if the CPI is falling from one year to the next,otherwise the outlays are smaller than needed to keep pace with the cost of living. 
E) smaller than needed to keep pace with the cost of living if the CPI is falling from one year to the next,otherwise the outlays are larger than needed to keep pace with the cost of living.

Question 4

The commodity substitution bias is most likely to put ________ into the CPI and so ________ the inflation rate.

Accepted Answer

A) a downward bias;understate 
B) an upward bias;understate 
C) an upward bias;overstate 
D) a downward bias;overstate 
E) a random bias;randomly overstate or understate 
A) a downward bias;understate 
B) an upward bias;understate 
C) an upward bias;overstate 
D) a downward bias;overstate 
E) a random bias;randomly overstate or understate

Question 5

If we compare the last 30 years of inflation as recorded by the CPI and the PCE price index,we find that the

Accepted Answer

A) two measures fluctuate together. 
B) CPI inflation rate has consistently been at least 5 percentage points above the PCE price index inflation rate. 
C) PCE price index inflation rate has consistently been at least 5 percentage points above the CPI inflation rate. 
D) two measures give very different inflation rates for most years. 
E) the CPI inflation rate was always positive,but the PCE price index inflation rate was frequently negative. 
A) two measures fluctuate together. 
B) CPI inflation rate has consistently been at least 5 percentage points above the PCE price index inflation rate. 
C) PCE price index inflation rate has consistently been at least 5 percentage points above the CPI inflation rate. 
D) two measures give very different inflation rates for most years. 
E) the CPI inflation rate was always positive,but the PCE price index inflation rate was frequently negative.

Question 6

When the price of,say,a package of rice changes,what must the BLS do next?

Accepted Answer

A) immediately incorporate the new price into the CPI 
B) determine if the new price is consistent with other price changes for the period 
C) determine if the size,quality,weight,or packing of the rice has changed and adjust the price accordingly 
D) ignore the price change 
E) immediately incorporate the new price into the CPI only if the price has fallen 
A) immediately incorporate the new price into the CPI 
B) determine if the new price is consistent with other price changes for the period 
C) determine if the size,quality,weight,or packing of the rice has changed and adjust the price accordingly 
D) ignore the price change 
E) immediately incorporate the new price into the CPI only if the price has fallen

Question 7

-The table above gives the CPI for a nation.Based on the table,we can determine that the reference base period is

Accepted Answer

A) 1994. 
B) 1996. 
C) 1998-2000. 
D) 2002. 
E) More information about when the Consumer Expenditure Survey was undertaken is needed to answer the question. 
A) 1994. 
B) 1996. 
C) 1998-2000. 
D) 2002. 
E) More information about when the Consumer Expenditure Survey was undertaken is needed to answer the question.

Question 8

In constructing the CPI,the BLS has to deal with commodity substitution bias,which is defined as

Accepted Answer

A) consumers' substitution of discount stores for full service stores to avoid the higher prices in the full service stores. 
B) consumers' substitution of cheaper goods for goods whose prices increase. 
C) the bias from quality changes in existing products that cause prices to increase. 
D) the bias from new goods being introduced that are more expensive than older goods. 
E) the bias that arises because the BLS changes the CPI market basket each month. 
A) consumers' substitution of discount stores for full service stores to avoid the higher prices in the full service stores. 
B) consumers' substitution of cheaper goods for goods whose prices increase. 
C) the bias from quality changes in existing products that cause prices to increase. 
D) the bias from new goods being introduced that are more expensive than older goods. 
E) the bias that arises because the BLS changes the CPI market basket each month.

Question 9

The presence of new goods that are of higher quality than the old goods leads the BLS to

Accepted Answer

A) update the market basket every time a new good is available. 
B) do nothing because at least some people still buy the old goods. 
C) try to separate price differences from improvements in quality. 
D) actually understate the cost of living when calculating the CPI. 
E) immediately update the reference base period used in calculating the CPI. 
A) update the market basket every time a new good is available. 
B) do nothing because at least some people still buy the old goods. 
C) try to separate price differences from improvements in quality. 
D) actually understate the cost of living when calculating the CPI. 
E) immediately update the reference base period used in calculating the CPI.

Question 10

The real interest rate equals the

Accepted Answer

A) nominal interest rate - inflation rate. 
B) nominal interest rate + inflation rate. 
C) (nominal interest rate ÷ inflation rate). 
D) inflation rate - nominal interest rate. 
E) (nominal interest rate + inflation rate)× 100. 
A) nominal interest rate - inflation rate. 
B) nominal interest rate + inflation rate. 
C) (nominal interest rate ÷ inflation rate). 
D) inflation rate - nominal interest rate. 
E) (nominal interest rate + inflation rate)× 100.

Question 11

Looking at the historical values for annual inflation in the United States as measured by the Consumer Price Index,it is clear that inflation was

Accepted Answer

A) higher on average during the 1990s than during the 1970s. 
B) higher on average during the 2000s than during the 1970s. 
C) never less than 0 percent at any time during the last 50 years. 
D) higher on average during the 1970s than during the 1980s. 
E) was never greater than 10 percent at any time during the last 50 years. 
A) higher on average during the 1990s than during the 1970s. 
B) higher on average during the 2000s than during the 1970s. 
C) never less than 0 percent at any time during the last 50 years. 
D) higher on average during the 1970s than during the 1980s. 
E) was never greater than 10 percent at any time during the last 50 years.

Question 12

If you get an 8 percent increase in your nominal income,your real income

Accepted Answer

A) definitely increases. 
B) increases only if the inflation rate is more than 8 percent. 
C) increases only if the inflation rate is equal to 8 percent. 
D) increases only if the inflation rate is less than 8 percent. 
E) increases if the inflation rate is more than or equal to 8 percent. 
A) definitely increases. 
B) increases only if the inflation rate is more than 8 percent. 
C) increases only if the inflation rate is equal to 8 percent. 
D) increases only if the inflation rate is less than 8 percent. 
E) increases if the inflation rate is more than or equal to 8 percent.

Question 13

If we look at the nominal versus real wage rates paid to Presidents over time,we find that

Accepted Answer

A) George Washington was paid a higher real wage rate than Bill Clinton. 
B) George W.Bush is the highest paid according to real wage rates. 
C) the real wage rate has steadily increased to $400,000 per year. 
D) the nominal wage has increased and decreased at different times because of inflation. 
E) George W.Bush's nominal wage is about equal to the average nominal wage paid all presidents. 
A) George Washington was paid a higher real wage rate than Bill Clinton. 
B) George W.Bush is the highest paid according to real wage rates. 
C) the real wage rate has steadily increased to $400,000 per year. 
D) the nominal wage has increased and decreased at different times because of inflation. 
E) George W.Bush's nominal wage is about equal to the average nominal wage paid all presidents.

Question 14

When discussing the CPI,the term "commodity substitution bias" refers to changes in

Accepted Answer

A) prices that lead business to change the items they buy. 
B) quantities that lead households to change the items they buy. 
C) prices that lead households to change the items they buy. 
D) income that lead households to change the items they buy. 
E) stores so that consumers switch from one store to another. 
A) prices that lead business to change the items they buy. 
B) quantities that lead households to change the items they buy. 
C) prices that lead households to change the items they buy. 
D) income that lead households to change the items they buy. 
E) stores so that consumers switch from one store to another.

Question 15

In the United States for the last 40 years,the nominal interest rate

Accepted Answer

A) and the real interest rate both decreased in almost every year. 
B) and the real interest rate were both constant in almost every year. 
C) was constant in most years and the real interest rate fluctuated. 
D) exceeded the real interest rate in virtually all the years. 
E) exceeded the real interest rate in about one half of the years and the real interest rate was greater than the nominal interest rate in the other half of the years. 
A) and the real interest rate both decreased in almost every year. 
B) and the real interest rate were both constant in almost every year. 
C) was constant in most years and the real interest rate fluctuated. 
D) exceeded the real interest rate in virtually all the years. 
E) exceeded the real interest rate in about one half of the years and the real interest rate was greater than the nominal interest rate in the other half of the years.

Question 16

The data in the table above shows the consumption by families in an economy.The year 2013 is the reference base period.
-Based on the table above,between 2013 and 2014,the inflation rate in this country was

Accepted Answer

A) -1.5 percent. 
B) 105.1 percent. 
C) 2.5 percent. 
D) 98.5 percent. 
E) -2.5 percent. 
A) -1.5 percent. 
B) 105.1 percent. 
C) 2.5 percent. 
D) 98.5 percent. 
E) -2.5 percent.

Question 17

If the bank returns $1,060 on the $1,000 deposited for a year during which inflation was 4 percent,the real interest rate is

Accepted Answer

A) 6 percent. 
B) 10 percent. 
C) -2 percent. 
D) 2 percent. 
E) 16 percent. 
A) 6 percent. 
B) 10 percent. 
C) -2 percent. 
D) 2 percent. 
E) 16 percent.

Question 18

You borrow at a nominal interest rate of 10 percent.If the inflation rate is 4 percent,then the real interest rate is

Accepted Answer

A) the $10 in interest you have to pay. 
B) 16 percent. 
C) 2.5 percent. 
D) 6 percent. 
E) 14 percent. 
A) the $10 in interest you have to pay. 
B) 16 percent. 
C) 2.5 percent. 
D) 6 percent. 
E) 14 percent.

Question 19

The CPI stands for

Accepted Answer

A) Citizens Paying Index. 
B) Corporate Pricing Index. 
C) Consumer Paying Index. 
D) Consumer Price Index. 
E) Corporate/Consumer Payment Index. 
A) Citizens Paying Index. 
B) Corporate Pricing Index. 
C) Consumer Paying Index. 
D) Consumer Price Index. 
E) Corporate/Consumer Payment Index.

Question 20

In the United States between 1981 and 2012,the

Accepted Answer

A) nominal wage rate increased more than the real wage rate. 
B) real wage rate increased more than the nominal wage rate. 
C) nominal and real wage rates increased the same amount. 
D) real and the nominal wage rates decreased the same amount. 
E) nominal wage rate decreased and the real wage rate increased. 
A) nominal wage rate increased more than the real wage rate. 
B) real wage rate increased more than the nominal wage rate. 
C) nominal and real wage rates increased the same amount. 
D) real and the nominal wage rates decreased the same amount. 
E) nominal wage rate decreased and the real wage rate increased.

The nominal wage rate is the

Which of the following formulas would you use to calculate the nominal wage rate?

Because a third of government outlays are linked directly to the CPI,as time passes,the CPI bias means that the government's outlays are

The commodity substitution bias is most likely to put into the CPI and so the inflation rate.

If we compare the last 30 years of inflation as recorded by the CPI and the PCE price index,we find that the

When the price of,say,a package of rice changes,what must the BLS do next?

-The table above gives the CPI for a nation.Based on the table,we can determine that the reference base period is

In constructing the CPI,the BLS has to deal with commodity substitution bias,which is defined as

The presence of new goods that are of higher quality than the old goods leads the BLS to

The real interest rate equals the

Looking at the historical values for annual inflation in the United States as measured by the Consumer Price Index,it is clear that inflation was

If you get an 8 percent increase in your nominal income,your real income

If we look at the nominal versus real wage rates paid to Presidents over time,we find that

When discussing the CPI,the term "commodity substitution bias" refers to changes in

In the United States for the last 40 years,the nominal interest rate

The data in the table above shows the consumption by families in an economy.The year 2013 is the reference base period. -Based on the table above,between 2013 and 2014,the inflation rate in this country was

If the bank returns $1,060 on the $1,000 deposited for a year during which inflation was 4 percent,the real interest rate is

You borrow at a nominal interest rate of 10 percent.If the inflation rate is 4 percent,then the real interest rate is

The CPI stands for

In the United States between 1981 and 2012,the

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 16: The Cpi and the Cost of Living

The nominal wage rate is the

Which of the following formulas would you use to calculate the nominal wage rate?

Because a third of government outlays are linked directly to the CPI,as time passes,the CPI bias means that the government's outlays are

The commodity substitution bias is most likely to put ________ into the CPI and so ________ the inflation rate.

If we compare the last 30 years of inflation as recorded by the CPI and the PCE price index,we find that the

When the price of,say,a package of rice changes,what must the BLS do next?

-The table above gives the CPI for a nation.Based on the table,we can determine that the reference base period is

In constructing the CPI,the BLS has to deal with commodity substitution bias,which is defined as

The presence of new goods that are of higher quality than the old goods leads the BLS to

The real interest rate equals the

Looking at the historical values for annual inflation in the United States as measured by the Consumer Price Index,it is clear that inflation was

If you get an 8 percent increase in your nominal income,your real income

If we look at the nominal versus real wage rates paid to Presidents over time,we find that

When discussing the CPI,the term "commodity substitution bias" refers to changes in

In the United States for the last 40 years,the nominal interest rate

The data in the table above shows the consumption by families in an economy.The year 2013 is the reference base period. -Based on the table above,between 2013 and 2014,the inflation rate in this country was

If the bank returns $1,060 on the $1,000 deposited for a year during which inflation was 4 percent,the real interest rate is

You borrow at a nominal interest rate of 10 percent.If the inflation rate is 4 percent,then the real interest rate is

The CPI stands for

In the United States between 1981 and 2012,the

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

The commodity substitution bias is most likely to put into the CPI and so the inflation rate.