Question 1

If the current year CPI is 90,then the price level has decreased 10 percent since the base year.

Accepted Answer

A) True 
 B)False

Question 2

The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent and the real interest rate is 4.5 percent.If the consumer price index was 200 in 2007,what would the consumer price index value be in 2008?

Accepted Answer

A)   192
B)   208
C)   209
D)   217E) A) and C)
F) A) and D)

Question 3

The substitution bias in the consumer price index refers to the

Accepted Answer

A)   substitution by consumers toward new goods and away from old goods.
B)   substitution by consumers toward a smaller number of high-quality goods and away from a larger number of low-quality goods.
C)   substitution by consumers toward goods that have become relatively less expensive and away from goods that have become relatively more expensive.
D)   substitution of new prices for old prices in the CPI basket of goods and services from one year to the next.E) B) and C)
F) A) and D)

Question 4

The consumer price index is used to

Accepted Answer

A)   monitor changes in the level of wholesale prices in the economy.
B)   monitor changes in the cost of living over time.
C)   monitor changes in the level of real GDP over time.
D)   monitor changes in the stock market.E) All of the above
F) A) and D)

Question 5

If the price index was 90 in year 1,100 in year 2,and 95 in year 3,then the economy experienced

Accepted Answer

A)   10 percent inflation between years 1 and 2 ,and 5 percent inflation between years 2 and 3.
B)   10 percent inflation between years 1 and 2,and 5 percent deflation between years 2 and 3.
C)   11.1 percent inflation between years 1 and 2,and 5 percent inflation between years 2 and 3.
D)   11.1 percent inflation between years 1 and 2,and 5 percent deflation between years 2 and 3.E) None of the above
F) All of the above

Question 6

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent.A year later,Bob withdraws his $105.If inflation 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 7

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent.A year later,Bob withdraws his $105.If inflation was 2 percent during the year the money was deposited,then Bob's purchasing power has increased by 3 percent.

Accepted Answer

A) True 
 B)False

Question 8

Samantha goes to the grocery store to make her monthly purchase of ginger ale.As she enters the soft drink section,she notices that the price of ginger ale has increased 15 percent,so she decides to buy some peppermint tea instead.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 effectE) All of the above
F) A) and B)

Question 9

Recent changes in methods used to compute the CPI have made the

Accepted Answer

A)   upward bias in the CPI inflation rate more severe than it used to be.
B)   upward bias in the CPI inflation rate less severe than it used to be.
C)   downward bias in the CPI inflation rate more severe than it used to be.
D)   downward bias in the CPI inflation rate less severe than it used to be.E) None of the above
F) All of the above

Question 10

When box office receipts are not corrected for inflation,the most popular movie of all time is

Accepted Answer

A)   Star Wars.
B)   Avatar.
C)   Gone With the Wind.
D)   The Dark Knight.E) B) and C)
F) None of the above

Question 11

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60.If the CPI rises from 150 to 195,then people likely will buy

Accepted Answer

A)   more milk and more T-shirts.
B)   more milk and fewer T-shirts.
C)   less milk and more T-shirts.
D)   less milk and fewer T-shirts.E) None of the above
F) A) and B)

Question 12

Which of the following changes in the price index produces the greatest rate of inflation: 100 to 110,150 to 165,or 180 to 198?

Accepted Answer

A)   100 to 110
B)   150 to 165
C)   180 to 198
D)   All of these changes produce the same rate of inflation.E) A) and B)
F) A) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Table 11-3
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 11-3.The cost of the basket

Accepted Answer

A)   increased by $10 from 2006 to 2007.
B)   increased by $42 from 2006 to 2007.
C)   increased by $70 from 2006 to 2007.
D)   increased by $150 from 2006 to 2007.E) A) and B)
F) A) and C)

Question 15

The price index was 110 in the first year,100 in the second year,and 96 in the third year.The economy experienced

Accepted Answer

A)   9.1 percent deflation between the first and second years,and 4 percent deflation between the second and third years.
B)   9.1 percent deflation between the first and second years,and 4.2 percent deflation between the second and third years.
C)   10 percent deflation between the first and second years,and 4 percent deflation between the second and third years.
D)   10 percent deflation between the first and second years,and 4.2 percent deflation between the second and third years.E) A) and B)
F) All of the above

Question 16

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010.What is the CPI in 2010?

Accepted Answer

The CPI in...

Question 17

Scenario 24-2
A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below.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 CPI in each year?

Accepted Answer

The CPI is...

Question 18

The inflation rate you are likely to hear on the nightly news is calculated from

Accepted Answer

A)   the GDP deflator.
B)   the CPI.
C)   the Dow Jones Industrial Average.
D)   the unemployment rate.E) A) and C)
F) B) and C)

Question 19

Which of the following statements regarding the consumer price index and the GDP deflator is correct?

Accepted Answer

A)   The two price measures are always equal.
B)   Divergence between the two price measures is the rule,not the exception.
C)   Divergence between the two price measures is the exception,not the rule.
D)   None of the above is correct.E) B) and C)
F) None of the above

Question 20

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

Accepted Answer

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

Exam 24: Measuring the Cost of Living

When box office receipts are not corrected for inflation,the most popular movie of all time is

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 inflation was 5 percent during the year the money was deposited,then Bob's purchasing power has not changed.

Correct Answer
verified

If the current year CPI is 90,then the price level has decreased 10 percent since the base year.

Correct Answer
verified

Table 11-3 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 11-3.The cost of the basket

Correct Answer
verified

Which of the following changes in the price index produces the greatest rate of inflation: 100 to 110,150 to 165,or 180 to 198?

Correct Answer
verified

Scenario 24-2 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below.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 CPI in each year?

Correct Answer
verified
The CPI is...
View Answer

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

Correct Answer
verified

The price index was 110 in the first year,100 in the second year,and 96 in the third year.The economy experienced

Correct Answer
verified

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

Correct Answer
verified

Recent changes in methods used to compute the CPI have made the

Correct Answer
verified

The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent and the real interest rate is 4.5 percent.If the consumer price index was 200 in 2007,what would the consumer price index value be in 2008?

Correct Answer
verified

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60.If the CPI rises from 150 to 195,then people likely will buy

Correct Answer
verified

The consumer price index is used to

Correct Answer
verified

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010.What is the CPI in 2010?

Correct Answer
verified
The CPI in...
View Answer

The substitution bias in the consumer price index refers to the

Correct Answer
verified

Which of the following statements regarding the consumer price index and the GDP deflator is correct?

Correct Answer
verified

The inflation rate you are likely to hear on the nightly news is calculated from

Correct Answer
verified

If the price index was 90 in year 1,100 in year 2,and 95 in year 3,then the economy experienced

Correct Answer
verified

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 inflation was 2 percent during the year the money was deposited,then Bob's purchasing power has increased by 3 percent.

Correct Answer
verified

Exam 24: Measuring the Cost of Living

When box office receipts are not corrected for inflation,the most popular movie of all time is

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 inflation was 5 percent during the year the money was deposited,then Bob's purchasing power has not changed.

Correct AnswerverifiedShow Answer

If the current year CPI is 90,then the price level has decreased 10 percent since the base year.

Correct AnswerverifiedShow Answer

Table 11-3 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 11-3.The cost of the basket

Correct AnswerverifiedShow Answer

Which of the following changes in the price index produces the greatest rate of inflation: 100 to 110,150 to 165,or 180 to 198?

Correct AnswerverifiedShow Answer

Scenario 24-2 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below.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 CPI in each year?

Correct AnswerverifiedThe CPI is...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The price index was 110 in the first year,100 in the second year,and 96 in the third year.The economy experienced

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Recent changes in methods used to compute the CPI have made the

Correct AnswerverifiedShow Answer

The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent and the real interest rate is 4.5 percent.If the consumer price index was 200 in 2007,what would the consumer price index value be in 2008?

Correct AnswerverifiedShow Answer

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60.If the CPI rises from 150 to 195,then people likely will buy

Correct AnswerverifiedShow Answer

The consumer price index is used to

Correct AnswerverifiedShow Answer

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010.What is the CPI in 2010?

Correct AnswerverifiedThe CPI in...View AnswerShow Answer

The substitution bias in the consumer price index refers to the

Correct AnswerverifiedShow Answer

Which of the following statements regarding the consumer price index and the GDP deflator is correct?

Correct AnswerverifiedShow Answer

The inflation rate you are likely to hear on the nightly news is calculated from

Correct AnswerverifiedShow Answer

If the price index was 90 in year 1,100 in year 2,and 95 in year 3,then the economy experienced

Correct AnswerverifiedShow Answer

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 inflation was 2 percent during the year the money was deposited,then Bob's purchasing power has increased by 3 percent.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The CPI is...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The CPI in...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified