Question 1

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 2014, then the consumer price index was

Accepted Answer

A)   80 in 2013, 100 in 2014, and 60 in 2015.
B)   98 in 2013, 100 in 2014, and 96 in 2015.
C)   90 in 2013, 100 in 2014, and 80 in 2015.
D)   180 in 2013, 200 in 2014, and 160 in 2015.E) A) and B)
F) A) and C)

Question 2

If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the inflation rate is 11 percent for 2006.

Accepted Answer

A) True 
 B)False

Question 3

Table 24-14
The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period.
 
-Refer to Table 24-14. Calculate the cost of a basket of goods for each month.

Accepted Answer

110 in January, 93.5...

Question 4

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is

Accepted Answer

A)   -2.5 percent.
B)   0.45 percent.
C)   2.5 percent.
D)   13.5 percent.E) A) and B)
F) A) and C)

Question 5

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that the prices of dairy products have risen relatively less than prices in general over the last several years. To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

A)   substitution bias
B)   introduction of new goods
C)   unmeasured quality change
D)   income biasE) A) and B)
F) A) and C)

Question 7

An increase in the price of imported coffee shows up

Accepted Answer

A)   in the consumer price index and in the GDP deflator.
B)   in the consumer price index, but not in the GDP deflator.
C)   in the GDP deflator, but not in the consumer price index.
D)   in neither the consumer price index nor in the GDP deflator.E) A) and B)
F) A) and C)

Question 8

Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

Accepted Answer

A)   Ms. Lane will repay the bank fewer dollars than she initially borrowed.
B)   Ms. Lane's repayment will give the bank less purchasing power than it originally loaned her.
C)   Ms. Lane's repayment will give the bank greater purchasing power than it originally loaned her.
D)   Ms. Lane's repayment will give the bank the same purchasing power that it originally loaned her.E) A) and D)
F) All of the above

Question 9

Which of the following agencies calculates the CPI?

Accepted Answer

A)   the National Price Board
B)   the Department Of Weight and Measurements
C)   the Bureau of Labor Statistics
D)   the Congressional Budget OfficeE) A) and D)
F) All of the above

Question 10

Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys.
 
-Refer to Table 24-5. The cost of the basket in 2006 was

Accepted Answer

A)   $9.
B)   $130.
C)   $140.
D)   $270.E) C) and D)
F) None of the above

Question 11

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Accepted Answer

A)   the percentage change in the price of pretzels is equal to the percentage change in the price of cookies from year to year.
B)   the number of pretzels bought by the typical consumer is equal to the number of cookies bought by the typical consumer in each year.
C)   neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year.
D)   neither the price of pretzels nor the price of cookies changes from year to year.E) A) and B)
F) A) and C)

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) E) B) and C)
F) None of the above

Question 13

Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?

Accepted Answer

A)   $5.39
B)   $25.00
C)   $29.11
D)   $37.11E) B) and C)
F) A) and D)

Question 14

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.E) B) and C)
F) A) and D)

Question 15

Compute how much each of the following items is worth in terms of today's dollars using 177 as the price index for today.
a. In 1926, the CPI was 17.7 and the price of a movie ticket was $0.25.
b. In 1932, the CPI was 13.1 and a cook earned $15.00 a week.
c. In 1943, the CPI was 17.4 and a gallon of gas cost $0.19.

Accepted Answer

a. The movie ticket is worth $.25 × 177/...

Question 16

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. How much was the cost of the basket in 2008?

Accepted Answer

A)   $78.25
B)   $84.75
C)   $169.50
D)   $456.50E) A) and B)
F) A) and C)

Question 17

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.E) A) and B)
F) A) and D)

Question 18

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. Suppose Will's 2009 food expenditures in 2011 dollars amounted to $5,670. Suppose also that the real interest rate in 2011 was 3 percent. Then, in 2011,

Accepted Answer

A)   the inflation rate was 8 percent and the nominal interest rate was 5 percent.
B)   the inflation rate was 9 percent and the nominal interest rate was 6 percent.
C)   the inflation rate was 8 percent and the nominal interest rate was 11 percent.
D)   the inflation rate was 9 percent and the nominal interest rate was 12 percent.E) None of the above
F) A) and B)

Question 19

When consumer spending is broken down into the major categories of goods and services, the largest single category is spending on transportation.

Accepted Answer

A) True 
 B)False

Question 20

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

Accepted Answer

A)   level of real GDP.
B)   ratio of consumption to GDP.
C)   ratio of net exports to GDP.
D)   standard of living.E) None of the above
F) A) and B)

Exam 16: Measuring the Cost of Living

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

Correct Answer
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Correct Answer
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a. The movie ticket is worth $.25 × 177/...
View Answer

An increase in the price of imported coffee shows up

Correct Answer
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Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Correct Answer
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Correct Answer
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If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is

Correct Answer
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The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

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

Correct Answer
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Suppose that the prices of dairy products have risen relatively less than prices in general over the last several years. To which problem in the construction of the CPI is this situation most relevant?

Correct Answer
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Correct Answer
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110 in January, 93.5...
View Answer

Which of the following agencies calculates the CPI?

Correct Answer
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Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?

Correct Answer
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When consumer spending is broken down into the major categories of goods and services, the largest single category is spending on transportation.

Correct Answer
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Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

Correct Answer
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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?

Correct Answer
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Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. The cost of the basket in 2006 was

Correct Answer
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If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the inflation rate is 11 percent for 2006.

Correct Answer
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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. How much was the cost of the basket in 2008?

Correct Answer
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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 2014, then the consumer price index was

Correct Answer
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If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.

Correct Answer
verified

Exam 16: Measuring the Cost of Living

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

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The movie ticket is worth $.25 × 177/...View AnswerShow Answer

An increase in the price of imported coffee shows up

Correct AnswerverifiedShow Answer

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is

Correct AnswerverifiedShow Answer

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that the prices of dairy products have risen relatively less than prices in general over the last several years. To which problem in the construction of the CPI is this situation most relevant?

Correct AnswerverifiedShow Answer

Correct Answerverified110 in January, 93.5...View AnswerShow Answer

Which of the following agencies calculates the CPI?

Correct AnswerverifiedShow Answer

Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?

Correct AnswerverifiedShow Answer

When consumer spending is broken down into the major categories of goods and services, the largest single category is spending on transportation.

Correct AnswerverifiedShow Answer

Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. The cost of the basket in 2006 was

Correct AnswerverifiedShow Answer

If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the inflation rate is 11 percent for 2006.

Correct AnswerverifiedShow Answer

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. How much was the cost of the basket in 2008?

Correct AnswerverifiedShow Answer

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 2014, then the consumer price index was

Correct AnswerverifiedShow Answer

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.

Correct AnswerverifiedShow Answer

Correct Answer
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a. The movie ticket is worth $.25 × 177/...
View Answer

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110 in January, 93.5...
View Answer

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