Question 1

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

Accepted Answer

A)   $37,711.86.
B)   $49,906.02.
C)   $66,750.00.
D)   $112,711.86.E) A) and D)
F) B) and D)

Question 2

The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year. The economy experienced

Accepted Answer

A)   5.0 percent deflation between the first and second years, and 3.0 percent deflation between the second and third years.
B)   7.5 percent deflation between the first and second years, and 4.3 percent deflation between the second and third years.
C)   5.3 percent inflation between the first and second years, and 4.1 percent inflation between the second and third years.
D)   7.5 percent inflation between the first and second years, and 4.3 percent inflation between the second and third years.E) C) and D)
F) A) and B)

Question 3

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.

Accepted Answer

A) True 
 B)False

Question 4

The CPI is a measure of the overall cost of the goods and services bought by

Accepted Answer

A)   a typical consumer, and the CPI is computed and reported by the Department of the Treasury.
B)   typical consumers and typical business firms, and the CPI is computed and reported by the Department of the Treasury.
C)   a typical consumer, and the CPI is computed and reported by the Bureau of Labor Statistics.
D)   typical consumers and typical business firms, and the CPI is computed and reported by the Bureau of Labor Statistics.E) A) and B)
F) None of the above

Question 5

Write the formula for finding the rate of inflation in 2011 if you have only the CPI for the years 2010, 2011, and 2012.

Accepted Answer

The answer of Write the formula for finding the rate...

Question 6

The consumer price index is

Accepted Answer

A)   not very useful as a measure of the cost of living.
B)   a perfect measure of the cost of living.
C)   a useful measure, but not a perfect measure, of the cost of living.
D)   not used as a measure of the cost of living.E) None of the above
F) A) and B)

Question 7

In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was 235 in 2013, then what is the price of the Firebird in 2013 dollars?

Accepted Answer

A)   $4,609.57
B)   $4,957.51
C)   $13,508.17
D)   $16,008.17E) All of the above
F) A) and C)

Question 8

Which of the following is not an example of a price index computed by the Bureau of Labor Statistics?

Accepted Answer

A)   the Los Angeles price index
B)   the energy price index
C)   the producer price index
D)   the stock price indexE) A) and D)
F) B) and C)

Question 9

The basket of goods in the consumer price index changes

Accepted Answer

A)   occasionally, as does the group of goods used to compute the GDP deflator.
B)   automatically, as does the group of goods used to compute the GDP deflator.
C)   occasionally, whereas the group of goods used to compute the GDP deflator changes automatically.
D)   automatically, whereas the group of goods used to compute the GDP deflator changes occasionally.E) None of the above
F) All of the above

Question 10

Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn.
 
-Refer to Table 24-3. If 2012 is the base year, then the inflation rate in 2013 was

Accepted Answer

A)   24.7 percent.
B)   54.0 percent.
C)   32.8 percent.
D)   38.0 percent.E) A) and D)
F) None of the above

Question 11

In 1972, one could buy model rocket engines for $1.50 each. If those same engines cost $2.50 each today, then which pair of CPIs would make the engine prices in today's dollars the same for both years?

Accepted Answer

A)   60 in 1972 and 95 today
B)   60 in 1972 and 120 today
C)   90 in 1972 and 150 today
D)   96 in 1972 and 154 todayE) C) and D)
F) B) and D)

Question 12

In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007?

Accepted Answer

A)   $0.83
B)   $2.25
C)   $2.50
D)   $3.00E) B) and D)
F) C) and D)

Question 13

Which of the following changes in the price index produces the greatest rate of inflation: 12 to 15, 20 to 24, or 30 to 35?

Accepted Answer

A)   12 to 15
B)   20 to 24
C)   30 to 35
D)   All of these changes produce the same rate of inflation.E) None of the above
F) A) and D)

Question 14

The CPI differs from the GDP deflator in that

Accepted Answer

A)   the CPI is a price index, while the GDP deflator is an inflation index.
B)   substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.
C)   increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator.
D)   increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator.E) None of the above
F) C) and D)

Question 15

For an imaginary economy, the value of the consumer price index was 138.75 in 2016, and the inflation rate was 10 percent between 2015 and 2016. The consumer price index in 2015 was

Accepted Answer

A)   126.1.
B)   128.8.
C)   148.8.
D)   152.6.E) A) and B)
F) C) and D)

Question 16

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Accepted Answer

A) True 
 B)False

Question 17

Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013.
-Refer to Scenario 24-3. In real terms, Josh Holloway's income amounts to about what percentage of Sue Holloway's income?

Accepted Answer

A)   71 percent
B)   141 percent
C)   165 percent
D)   198 percentE) A) and B)
F) C) and D)

Question 18

If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal interest rate is 7 percent.

Accepted Answer

A) True 
 B)False

Question 19

Table 24-2
The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans.
 
-Refer to Table 24-2. If 2012 is the base year, then the CPI for 2012 was

Accepted Answer

A)   95.7.
B)   100.0.
C)   90.0.
D)   110.0.E) A) and B)
F) A) and C)

Question 20

The nominal interest rate tells you

Accepted Answer

A)   how fast the number of dollars in your bank account rises over time.
B)   how fast the purchasing power of your bank account rises over time.
C)   the number of dollars in your bank account today.
D)   the purchasing power of your bank account today.E) A) and B)
F) B) and D)

Exam 11: Measuring the Cost of Living

The CPI is a measure of the overall cost of the goods and services bought by

Correct Answer
verified

In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was 235 in 2013, then what is the price of the Firebird in 2013 dollars?

Correct Answer
verified

The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year. The economy experienced

Correct Answer
verified

In 1972, one could buy model rocket engines for $1.50 each. If those same engines cost $2.50 each today, then which pair of CPIs would make the engine prices in today's dollars the same for both years?

Correct Answer
verified

If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal interest rate is 7 percent.

Correct Answer
verified

The consumer price index is

Correct Answer
verified

The nominal interest rate tells you

Correct Answer
verified

Correct Answer
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Write the formula for finding the rate of inflation in 2011 if you have only the CPI for the years 2010, 2011, and 2012.

Correct Answer
verified

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.

Correct Answer
verified

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. If 2012 is the base year, then the inflation rate in 2013 was

Correct Answer
verified

For an imaginary economy, the value of the consumer price index was 138.75 in 2016, and the inflation rate was 10 percent between 2015 and 2016. The consumer price index in 2015 was

Correct Answer
verified

The CPI differs from the GDP deflator in that

Correct Answer
verified

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2012 is the base year, then the CPI for 2012 was

Correct Answer
verified

The basket of goods in the consumer price index changes

Correct Answer
verified

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Correct Answer
verified

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

Correct Answer
verified

Correct Answer
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Which of the following is not an example of a price index computed by the Bureau of Labor Statistics?

Correct Answer
verified

Which of the following changes in the price index produces the greatest rate of inflation: 12 to 15, 20 to 24, or 30 to 35?

Correct Answer
verified

Exam 11: Measuring the Cost of Living

The CPI is a measure of the overall cost of the goods and services bought by

Correct AnswerverifiedShow Answer

In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was 235 in 2013, then what is the price of the Firebird in 2013 dollars?

Correct AnswerverifiedShow Answer

The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year. The economy experienced

Correct AnswerverifiedShow Answer

In 1972, one could buy model rocket engines for $1.50 each. If those same engines cost $2.50 each today, then which pair of CPIs would make the engine prices in today's dollars the same for both years?

Correct AnswerverifiedShow Answer

If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal interest rate is 7 percent.

Correct AnswerverifiedShow Answer

The consumer price index is

Correct AnswerverifiedShow Answer

The nominal interest rate tells you

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Write the formula for finding the rate of inflation in 2011 if you have only the CPI for the years 2010, 2011, and 2012.

Correct AnswerverifiedShow Answer

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.

Correct AnswerverifiedShow Answer

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. If 2012 is the base year, then the inflation rate in 2013 was

Correct AnswerverifiedShow Answer

For an imaginary economy, the value of the consumer price index was 138.75 in 2016, and the inflation rate was 10 percent between 2015 and 2016. The consumer price index in 2015 was

Correct AnswerverifiedShow Answer

The CPI differs from the GDP deflator in that

Correct AnswerverifiedShow Answer

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2012 is the base year, then the CPI for 2012 was

Correct AnswerverifiedShow Answer

The basket of goods in the consumer price index changes

Correct AnswerverifiedShow Answer

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Correct AnswerverifiedShow Answer

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not an example of a price index computed by the Bureau of Labor Statistics?

Correct AnswerverifiedShow Answer

Which of the following changes in the price index produces the greatest rate of inflation: 12 to 15, 20 to 24, or 30 to 35?

Correct AnswerverifiedShow Answer

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