Question 1

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

Accepted Answer

A)   $4.75 purchased in 1955.
B)   $20.00 purchased in 1955.
C)   $95.00 purchased in 1955.
D)   $500 purchased in 1955.E) None of the above
F) B) and C)

Question 2

What do real interest rates account for that nominal interest rates do not?

Accepted Answer

Unlike nominal interest rates,...

Question 3

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the smallest?

Accepted Answer

A)   education & communication
B)   apparel
C)   medical care
D)   recreationE) A) and C)
F) None of the above

Question 4

Table 24-4
The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators.
 
-Refer to Table 24-4. If 2013 is the base year, then the consumer price index was

Accepted Answer

A)   80.8 in 2012, 100 in 2013, and 107.7 in 2014.
B)   80.5 in 2012, 100 in 2013, and 107.3 in 2014.
C)   247.5 in 2012, 307.5 in 2013, and 330 in 2014.
D)   210 in 2012, 260 in 2013, and 280 in 2014.E) B) and D)
F) A) and D)

Question 5

Suppose the price index was 105 in 2017, 126 in 2018, and the inflation rate was lower between 2018 and 2019 than it was between 2017 and 2018. This means that

Accepted Answer

A)   the price index in 2019 was lower than 126.0.
B)   the price index in 2019 was lower than 147.0.
C)   the price index in 2019 was lower than 151.2.
D)   the inflation rate between 2018 and 2019 was lower than 1.2 percent.E) C) and D)
F) B) and D)

Question 6

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

Question 7

Table 24-6
The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.
 
-Refer to Table 24-6. If the base year is 2011, then the CPI

Accepted Answer

A)   increased from 2009 to 2010 and increased from 2010 to 2011.
B)   increased from 2009 to 2010 and decreased from 2010 to 2011.
C)   decreased from 2009 to 2010 and increased from 2010 to 2011.
D)   decreased from 2009 to 2010 and decreased from 2010 to 2011.E) B) and D)
F) None of the above

Question 8

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is

Accepted Answer

A)   -2 percent.
B)   0.4 percent.
C)   2 percent.
D)   12 percent.E) A) and D)
F) None of the above

Question 9

An increase in the price of Irish whiskey imported into the United States will be reflected in

Accepted Answer

A)   both the U.S. GDP deflator and the U.S. CPI.
B)   neither the U.S. GDP deflator nor the U.S. CPI.
C)   the U.S. GDP deflator, but not the U.S. CPI.
D)   the U.S. CPI, but not the U.S. GDP deflator.E) A) and C)
F) B) and C)

Question 10

If 2010 is the base year, then the inflation rate in 2015 equals

Accepted Answer

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

Question 11

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) All of the above

Question 12

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called

Accepted Answer

A)   price-change neglect.
B)   unmeasured quality change.
C)   substitution bias.
D)   relative bias.E) A) and B)
F) A) and C)

Question 13

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Accepted Answer

A) True 
 B)False

Question 14

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

Accepted Answer

A)   $3.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
B)   $3.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.
C)   $4.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
D)   $4.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.E) A) and C)
F) B) and C)

Question 15

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 D)
F) A) and B)

Question 16

Which of the following statements is correct about the relationship between inflation and interest rates?

Accepted Answer

A)   There is no relationship between inflation and interest rates.
B)   The interest rate is determined by the rate of inflation.
C)   In order to fully understand inflation, we need to know how to correct for the effects of interest rates.
D)   In order to fully understand interest rates, we need to know how to correct for the effects of inflation.E) A) and B)
F) A) and C)

Question 17

David earned a salary of $43,500 in 1994 and $89,000 in 2010. The consumer price index was 148.2 in 1994 and 215.3 in 2010. David's 1994 salary in 2010 dollars is

Accepted Answer

A)   $43,849.05
B)   $61,263.43
C)   $63,195.34
D)   $93,655.50E) All of the above
F) A) and B)

Question 18

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because

Accepted Answer

A)   new goods and services are always of higher quality than existing goods and services.
B)   new goods and services cost less than existing goods and services.
C)   new goods and services cost more than existing goods and services.
D)   when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living.E) B) and C)
F) A) and C)

Question 19

The value of the consumer price index increased from 140 to 147 during 2006. Nathan opened a bank account at the beginning of 2006, and at the end of 2006 his account balance was $12,840. The purchasing power of Nathan's account increased by 2 percent during the year. We can conclude that Nathan opened his account with a deposit of $11,500 at the beginning of 2006.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following agencies calculates the CPI?

Accepted Answer

A)   Bureau of Labor Statistics
B)   Congressional Budget Office
C)   Federal Reserve
D)   Bureau of National Price Standards and RecordsE) B) and C)
F) A) and D)

Exam 11: Measuring the Cost of Living

An increase in the price of imported coffee shows up

Correct Answer
verified

Which of the following agencies calculates the CPI?

Correct Answer
verified

Changes in the quality of a good

Correct Answer
verified

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called

Correct Answer
verified

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Correct Answer
verified

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is

Correct Answer
verified

David earned a salary of $43,500 in 1994 and $89,000 in 2010. The consumer price index was 148.2 in 1994 and 215.3 in 2010. David's 1994 salary in 2010 dollars is

Correct Answer
verified

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

Correct Answer
verified

Correct Answer
verified

If 2010 is the base year, then the inflation rate in 2015 equals

Correct Answer
verified

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. If the base year is 2011, then the CPI

Correct Answer
verified

An increase in the price of Irish whiskey imported into the United States will be reflected in

Correct Answer
verified

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
verified

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because

Correct Answer
verified

Which of the following statements is correct about the relationship between inflation and interest rates?

Correct Answer
verified

Suppose the price index was 105 in 2017, 126 in 2018, and the inflation rate was lower between 2018 and 2019 than it was between 2017 and 2018. This means that

Correct Answer
verified

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

Correct Answer
verified

What do real interest rates account for that nominal interest rates do not?

Correct Answer
verified
Unlike nominal interest rates,...
View Answer

Table 24-4 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 24-4. If 2013 is the base year, then the consumer price index was

Correct Answer
verified

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the smallest?

Correct Answer
verified

Exam 11: Measuring the Cost of Living

An increase in the price of imported coffee shows up

Correct AnswerverifiedShow Answer

Which of the following agencies calculates the CPI?

Correct AnswerverifiedShow Answer

Changes in the quality of a good

Correct AnswerverifiedShow Answer

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called

Correct AnswerverifiedShow Answer

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Correct AnswerverifiedShow Answer

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is

Correct AnswerverifiedShow Answer

David earned a salary of $43,500 in 1994 and $89,000 in 2010. The consumer price index was 148.2 in 1994 and 215.3 in 2010. David's 1994 salary in 2010 dollars is

Correct AnswerverifiedShow Answer

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If 2010 is the base year, then the inflation rate in 2015 equals

Correct AnswerverifiedShow Answer

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. If the base year is 2011, then the CPI

Correct AnswerverifiedShow Answer

An increase in the price of Irish whiskey imported into the United States will be reflected in

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

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because

Correct AnswerverifiedShow Answer

Which of the following statements is correct about the relationship between inflation and interest rates?

Correct AnswerverifiedShow Answer

Suppose the price index was 105 in 2017, 126 in 2018, and the inflation rate was lower between 2018 and 2019 than it was between 2017 and 2018. This means that

Correct AnswerverifiedShow Answer

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

Correct AnswerverifiedShow Answer

What do real interest rates account for that nominal interest rates do not?

Correct AnswerverifiedUnlike nominal interest rates,...View AnswerShow Answer

Table 24-4 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 24-4. If 2013 is the base year, then the consumer price index was

Correct AnswerverifiedShow Answer

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the smallest?

Correct AnswerverifiedShow Answer

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Unlike nominal interest rates,...
View Answer

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Correct Answer
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