Question 1

Assume most athletic apparel bought by U.S. consumers is imported from other nations. If all else is constant, an increase in the price of foreign-made athletic apparel will cause the U.S.

Accepted Answer

A)   consumer price index and GDP deflator to increase by exactly the same amount.
B)   GDP deflator to increase more than the consumer price index.
C)   consumer price index to increase more than the GDP deflator.
D)   GDP deflator to decrease less than the consumer price index.E) A) and B)
F) None of the above

Question 2

Suppose the Tooth Fairy paid 50 cents for a tooth in 1970. The CPI in 1970 was 38.8, while the CPI in 2010 was 218.1. What is the value of the Tooth Fairy's payment in 2010 dollars?

Accepted Answer

The answer of Suppose the Tooth Fairy paid 50 cents...

Question 3

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 2011 salary in 1980 dollars?

Accepted Answer

A)   $25,511
B)   $52,073
C)   $40,140
D)   $41,159E) B) and C)
F) C) and D)

Question 4

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $58. The value of the CPI in 2016 was

Accepted Answer

A)   106.0.
B)   104.0.
C)   111.5.
D)   116.0.E) All of the above
F) A) and C)

Question 5

The real interest rate measures the change in dollar amounts.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a basket of goods and services has been selected to calculate the CPI. In 2002, the basket's cost was $80; in 2008, the basket's cost was $92; and in 2010, the basket's cost was $108. The base year must be

Accepted Answer

A)   2002.
B)   2008.
C)   one of the years between 2008 and 2010.
D)   The base year cannot be determined from the given information.E) B) and C)
F) All of the above

Question 7

If the quality of a good improves while its price remains the same, then the value of a dollar

Accepted Answer

A)   rises and the cost of living increases.
B)   rises and the cost of living decreases.
C)   falls and the cost of living increases.
D)   falls and the cost of living decreases.E) A) and D)
F) B) and C)

Question 8

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

Accepted Answer

A)   -5 percent.
B)   1.67 percent.
C)   5 percent.
D)   11 percent.E) None of the above
F) A) and D)

Question 9

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 CPI for 2012 was

Accepted Answer

A)   75.3.
B)   100.0.
C)   116.0.
D)   132.8.E) B) and D)
F) All of the above

Question 10

Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator.

Accepted Answer

The CPI focuses on goods and services bo...

Question 11

What basket of goods and services is used to construct the CPI?

Accepted Answer

A)   a random sample of all goods and services produced in the economy
B)   the goods and services that are typically bought by consumers as determined by government surveys
C)   only food, clothing, transportation, entertainment, and education
D)   the least expensive and the most expensive goods and services in each major category of consumer expendituresE) A) and B)
F) C) and D)

Question 12

Which of the following statements is correct?

Accepted Answer

A)   In order to calculate the inflation rate for the year 2011, we need to know the values of the consumer price index for the years 2009, 2010, and 2011.
B)   Changes in the consumer price index are often thought to be useful in predicting changes in the producer price index.
C)   Despite its name, the "consumer price index" really measures the overall cost of the goods and services bought by consumers, business firms, and units of government.
D)   If the prices of all goods and services changed proportionately over time, then the consumer price index would reflect no substitution bias.E) None of the above
F) All of the above

Question 13

List the three major problems in using the CPI as a measure of the cost of living.

Accepted Answer

1) Substitution bias. The CPI ignores th...

Question 14

What is the difference between the Consumer Price Index and the Producer Price Index?

Accepted Answer

The CPI measures the cost of a...

Question 15

Consternation Corporation has an agreement with its workers to index completely the wage of its employees using the CPI. Consternation Corporation currently pays its production line workers $8.00 an hour and is scheduled to index their wages today. If the CPI is currently 160 and was 128 a year ago, the firm should increase the hourly wages of its workers by

Accepted Answer

A)   $0.25.
B)   $1.60.
C)   $2.00.
D)   $2.56.E) B) and C)
F) All of the above

Question 16

Scenario 24-5
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 24-5. Using 2009 as the base year, what is the CPI in each year?

Accepted Answer

In 2009 the CPI is 1...

Question 17

During a certain year, the nominal interest rate was 8 percent, the real interest rate was 3 percent, and the CPI was 176.7 at the beginning of the year. The CPI at the end of the year was

Accepted Answer

A)   196.1.
B)   185.5.
C)   168.3.
D)   159.2.E) C) and D)
F) All of the above

Question 18

Jay and Joyce meet George, the banker, to work out the details of a mortgage. They all expect that inflation will be 2 percent over the term of the loan, and they agree on a nominal interest rate of 6 percent. As it turns out, the inflation rate is 5 percent over the term of the loan.
a. What was the expected real interest rate?
b. What was the actual real interest rate?
c. Who benefited and who lost because of the unexpected inflation?

Accepted Answer

a. The expected real interest rate was 4...

Question 19

By keeping the basket of goods and services the same when computing the CPI, the Bureau of Labor Statistics isolates the effects of price changes from the effect of any quantity changes that might be occurring at the same time.

Accepted Answer

A) True 
 B)False

Question 20

In a particular economy, the price index was 120 in 2012 and 130 in 2013. Which of the following statements is correct?

Accepted Answer

A)   The economy experienced a rising price level between 2012 and 2013.
B)   The economy experienced a higher inflation rate between 2012 and 2013 than it had experienced between 2011 and 2012.
C)   The inflation rate between 2012 and 2013 was 10 percent.
D)   The base year is 2011.E) C) and D)
F) None of the above

Exam 6: Measuring the Cost of Living

Correct Answer
verified
In 2009 the CPI is 1...
View Answer

List the three major problems in using the CPI as a measure of the cost of living.

Correct Answer
verified
1) Substitution bias. The CPI ignores th...
View Answer

Suppose the Tooth Fairy paid 50 cents for a tooth in 1970. The CPI in 1970 was 38.8, while the CPI in 2010 was 218.1. What is the value of the Tooth Fairy's payment in 2010 dollars?

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 CPI for 2012 was

Correct Answer
verified

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $58. The value of the CPI in 2016 was

Correct Answer
verified

If the quality of a good improves while its price remains the same, then the value of a dollar

Correct Answer
verified

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 2011 salary in 1980 dollars?

Correct Answer
verified

Correct Answer
verified
a. The expected real interest rate was 4...
View Answer

What is the difference between the Consumer Price Index and the Producer Price Index?

Correct Answer
verified
The CPI measures the cost of a...
View Answer

During a certain year, the nominal interest rate was 8 percent, the real interest rate was 3 percent, and the CPI was 176.7 at the beginning of the year. The CPI at the end of the year was

Correct Answer
verified

What basket of goods and services is used to construct the CPI?

Correct Answer
verified

Suppose a basket of goods and services has been selected to calculate the CPI. In 2002, the basket's cost was $80; in 2008, the basket's cost was $92; and in 2010, the basket's cost was $108. The base year must be

Correct Answer
verified

Assume most athletic apparel bought by U.S. consumers is imported from other nations. If all else is constant, an increase in the price of foreign-made athletic apparel will cause the U.S.

Correct Answer
verified

Correct Answer
verified

Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator.

Correct Answer
verified
The CPI focuses on goods and services bo...
View Answer

By keeping the basket of goods and services the same when computing the CPI, the Bureau of Labor Statistics isolates the effects of price changes from the effect of any quantity changes that might be occurring at the same time.

Correct Answer
verified

In a particular economy, the price index was 120 in 2012 and 130 in 2013. Which of the following statements is correct?

Correct Answer
verified

The real interest rate measures the change in dollar amounts.

Correct Answer
verified

Exam 6: Measuring the Cost of Living

Correct AnswerverifiedIn 2009 the CPI is 1...View AnswerShow Answer

List the three major problems in using the CPI as a measure of the cost of living.

Correct Answerverified1) Substitution bias. The CPI ignores th...View AnswerShow Answer

Suppose the Tooth Fairy paid 50 cents for a tooth in 1970. The CPI in 1970 was 38.8, while the CPI in 2010 was 218.1. What is the value of the Tooth Fairy's payment in 2010 dollars?

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 CPI for 2012 was

Correct AnswerverifiedShow Answer

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $58. The value of the CPI in 2016 was

Correct AnswerverifiedShow Answer

If the quality of a good improves while its price remains the same, then the value of a dollar

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 2011 salary in 1980 dollars?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The expected real interest rate was 4...View AnswerShow Answer

What is the difference between the Consumer Price Index and the Producer Price Index?

Correct AnswerverifiedThe CPI measures the cost of a...View AnswerShow Answer

During a certain year, the nominal interest rate was 8 percent, the real interest rate was 3 percent, and the CPI was 176.7 at the beginning of the year. The CPI at the end of the year was

Correct AnswerverifiedShow Answer

What basket of goods and services is used to construct the CPI?

Correct AnswerverifiedShow Answer

Suppose a basket of goods and services has been selected to calculate the CPI. In 2002, the basket's cost was $80; in 2008, the basket's cost was $92; and in 2010, the basket's cost was $108. The base year must be

Correct AnswerverifiedShow Answer

Assume most athletic apparel bought by U.S. consumers is imported from other nations. If all else is constant, an increase in the price of foreign-made athletic apparel will cause the U.S.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator.

Correct AnswerverifiedThe CPI focuses on goods and services bo...View AnswerShow Answer

By keeping the basket of goods and services the same when computing the CPI, the Bureau of Labor Statistics isolates the effects of price changes from the effect of any quantity changes that might be occurring at the same time.

Correct AnswerverifiedShow Answer

In a particular economy, the price index was 120 in 2012 and 130 in 2013. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The real interest rate measures the change in dollar amounts.

Correct AnswerverifiedShow Answer

Correct Answer
verified
In 2009 the CPI is 1...
View Answer

Correct Answer
verified
1) Substitution bias. The CPI ignores th...
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
a. The expected real interest rate was 4...
View Answer

Correct Answer
verified
The CPI measures the cost of a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The CPI focuses on goods and services bo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified