Exam 16: The Cpi and the Cost of Living

For each of the following values of nominal GDP and real GDP,calculate the GDP price index. a.Nominal GDP = $600;real GDP = $800. b.Nominal GDP = $900;real GDP = $900. c.Nominal GDP = $1,200;real GDP = $1,000.

Explain how the real interest rate could be negative and how this situation would benefit the borrower.

Nominal and real wage rates

-The table above has real and nominal GDP for two years for a foreign country. a.What does the GDP price index equal in 2010? What does the value of the GDP price index tell you about 2010? b.What does the GDP price index equal in 2011?

If Caterpillar Inc.raises the price of earth-moving equipment that it manufactures in Illinois,then the CPI will ________ and the GDP deflator will ________.

If real GDP is greater than nominal GDP then the GDP price index

The CPI is calculated by the Bureau of Labor Statistics on a frequency of every

Economists agree that the CPI

The GDP price index can be interpreted as

Which of the following statements about the CPI is (are)correct? I The only significant bias in the CPI is the commodity substitution bias. Ii.The CPI probably overstates inflation by 1.1 percentage points a year. Iii.As far as the bias in the CPI is concerned,the new goods bias and the outlet substitution biases are irrelevant.

The GDP deflator measures

To find the cost of the CPI market basket in the base period prices we have to multiply the

The inflation rate is the

-Consumers in a country buy only two goods,pens and CDs.The prices and quantities purchased by urban households are in the table above.If 2011 is the reference base year,the cost of the CPI market basket in the base year is

Suppose that last year,the price of strawberries was $2 and the price of milk was $1.This year,the price of milk is $2 and the price of strawberries is $1.Which of the following statements is true?

The Consumer Price Index measures the average of the prices paid by urban consumers for a ________ of consumer goods and services.

-The data in the table above shows the consumption by families in a small (poor)economy.The families consume only salt and bread.The reference base period is 2011.The cost of the CPI market basket in 2011 is

The formula for the CPI is

If the real interest rate is 7 percent when the nominal interest is 12 rate is percent,the inflation rate is

Mark has a two-year wage contract with his employer.Mark's wage contract specifies a $50,000 salary for the first year,and specifies a salary increase equal to the percentage increase in the CPI during the second year.The percentage increase in the CPI during the year was 4.0 percentage points.If the CPI overstates inflation by 1.0 percentage point,at the end of the first year Mark's salary increased by ________ more than it would have without the upward bias.