Question 1

During periods of deflation, the nominal interest rate will be​

Accepted Answer

A) ​higher than the real interest rate. 
B) ​lower than the real interest rate. 
C) ​the same as the real interest rate. 
D) ​possibly higher, lower, or the same as the real interest rate.The answer depends on how much deflation there is in the economy.

Question 2

Scenario 24-2
​
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-2. Using 2010 as the base year, what is the inflation rate in 2010?

Accepted Answer

The answer of Scenario 24-2
​
Suppose the residents of Mediaville spend...

Question 3

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

Accepted Answer

A) True 
 B)False

Question 4

The CPI and the GDP deflator

Accepted Answer

A) generally move together. 
B) generally show different patterns of movement. 
C) always show identical changes. 
D) always show different patterns of movement.

Question 5

Table 24-8
The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year.
 $$\begin{array} { | l | l | l | } 
\hline \text { Year } & \begin{array} { l } 
\text { Consumer } \
\text { Price Index }
\end{array} & \text { Inflation Rate } \
\hline 2010 & 100 & \
\hline 2011 & 120 & \mathrm {~B} \
\hline 2012 & \mathrm {~A} & 15 \% \
\hline 2013 & 134 & \mathrm { C } \
\hline
\end{array}$$
-Refer to Table 24-8. Calculate the missing value that belongs in space B.

Accepted Answer

The answer of Table 24-8
The table below lists annual consumer...

Question 6

Suppose that in 2018, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

Accepted Answer

A) GDP will increase in 2019. 
B) the producer price index will increase by more than 1.5 percent in 2019. 
C) interest rates will decrease in the future. 
D) the consumer price index will increase in the future.

Question 7

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

Accepted Answer

A) GDP deflator rises much more than does the consumer price index. 
B) consumer price index rises much more than does the GDP deflator. 
C) GDP deflator and the consumer price index rise by about the same amount. 
D) consumer price index rises slightly more than does the GDP deflator.

Question 8

In a period of inflation real interest rates will be greater than nominal interest rates.

Accepted Answer

A) True 
 B)False

Question 9

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 10

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.

Accepted Answer

A) True 
 B)False

Question 11

Table 24-2
The following table pertains to Wiskancia, an economy in which the typical consumer's basket consists of 15 pounds of apples and 7 teddy bears.
​
​
 $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Price of Apples } \
\text { (Dollars per pound) }
\end{array} & \begin{array} { c } 
\text { Price of Teddy bears } \
\text { (Dollars per toy) }
\end{array} \
\hline 1 & 14 & 7 \
\hline 2 & 12 & 5 \
\hline 3 & 15 & 9 \
\hline
\end{array}$$
-Refer to Table 24-2. If the base year is Year 1, then the CPI in Year 3 was

Accepted Answer

A) 120.5. 
B) -111.2. 
C) 74.7. 
D) 111.2.

Question 12

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Accepted Answer

A) Try to include all the goods and services that the typical consumer buys. 
B) Try to weight the goods and services that the typical consumer buys according to how much consumers buy of each item. 
C) Survey consumers to determine what the typical consumer buys. 
D) Survey sellers to determine what the typical consumer buys.

Question 13

Changes in the quality of a good

Accepted Answer

A) do not present a problem in the construction of the consumer price index. 
B) present a problem in the construction of the consumer price index, and that problem is sometimes referred to as substitution bias. 
C) are not accounted for, as a matter of policy, by the Bureau of Labor Statistics. 
D) can lead to either an increase or a decrease in the value of a dollar.

Question 14

Which of the following is correct?

Accepted Answer

A) The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers. 
B) The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers. 
C) The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers. 
D) The GDP deflator is more commonly used as a gauge of inflation than the CPI is.

Question 15

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because the

Accepted Answer

A) CPI is easier to measure. 
B) CPI includes more goods and services that the GDP deflator does. 
C) CPI better reflects the goods and services bought by consumers. 
D) GDP deflator cannot be used to gauge inflation.

Question 16

One advantage of using the CPI over the GDP Deflator is that the CPI updates the basket of goods used to compute the index each month whereas the GDP Deflator maintains the same basket of goods for long periods of time.​

Accepted Answer

A) True 
 B)False

Question 17

If the price of beef rises and consumers buy more chicken and less beef, what kind of bias does the consumer price index exhibit?

Accepted Answer

The answer of If the price of beef rises and...

Question 18

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator.

Accepted Answer

A) True 
 B)False

Question 19

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

The answer of In 1954, Mickey Mantle earned $21,000 playing...

Question 20

Scenario 24-1
​
Sue Lewis was an accountant in 1943 and earned $12,000 that year. Her son is an accountant too and he earned $220,000 this year. Suppose the price index was 18.9 in 1943 and 20.5 in the current year.
-Refer to Scenario 24-1. Sue's 1943 income in current year dollars is

Accepted Answer

A) $19,200. 
B) $246,000. 
C) $13,016. 
D) $238,624.

Exam 24: Measuring the Cost of Living

During periods of deflation, the nominal interest rate will be

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

The CPI and the GDP deflator

Suppose that in 2018, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

In a period of inflation real interest rates will be greater than nominal interest rates.

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

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Changes in the quality of a good

Which of the following is correct?

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because the

One advantage of using the CPI over the GDP Deflator is that the CPI updates the basket of goods used to compute the index each month whereas the GDP Deflator maintains the same basket of goods for long periods of time.

If the price of beef rises and consumers buy more chicken and less beef, what kind of bias does the consumer price index exhibit?

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator.

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?

Scenario 24-1 Sue Lewis was an accountant in 1943 and earned $12,000 that year. Her son is an accountant too and he earned $220,000 this year. Suppose the price index was 18.9 in 1943 and 20.5 in the current year. -Refer to Scenario 24-1. Sue's 1943 income in current year dollars is

Exam 24: Measuring the Cost of Living

During periods of deflation, the nominal interest rate will be​

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

The CPI and the GDP deflator

Suppose that in 2018, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

In a period of inflation real interest rates will be greater than nominal interest rates.

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

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Changes in the quality of a good

Which of the following is correct?

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because the

One advantage of using the CPI over the GDP Deflator is that the CPI updates the basket of goods used to compute the index each month whereas the GDP Deflator maintains the same basket of goods for long periods of time.​

If the price of beef rises and consumers buy more chicken and less beef, what kind of bias does the consumer price index exhibit?

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator.

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?

Scenario 24-1 ​ Sue Lewis was an accountant in 1943 and earned $12,000 that year. Her son is an accountant too and he earned $220,000 this year. Suppose the price index was 18.9 in 1943 and 20.5 in the current year. -Refer to Scenario 24-1. Sue's 1943 income in current year dollars is

During periods of deflation, the nominal interest rate will be

One advantage of using the CPI over the GDP Deflator is that the CPI updates the basket of goods used to compute the index each month whereas the GDP Deflator maintains the same basket of goods for long periods of time.

Scenario 24-1 Sue Lewis was an accountant in 1943 and earned $12,000 that year. Her son is an accountant too and he earned $220,000 this year. Suppose the price index was 18.9 in 1943 and 20.5 in the current year. -Refer to Scenario 24-1. Sue's 1943 income in current year dollars is