Question 1

Table 24-1
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 24-1.If 2008 is the base year,then the consumer price index was

Accepted Answer

A)   100.00 in 2008,110.03 in 2009,and 117.43 in 2010.
B)   100.00 in 2008,110.03 in 2009,and 129.20 in 2010.
C)   100.00 in 2008,117.00 in 2009,and 132.50 in 2010.
D)   169.50 in 2008,186.50 in 2009,and 219.00 in 2010.E) A) and B)
F) A) and C)

Question 2

The GDP deflator reflects the

Accepted Answer

A)   level of prices in the base year relative to the current level of prices.
B)   current level of prices relative to the level of prices in the base year.
C)   level of real output in the base year relative to the current level of real output.
D)   current level of real output relative to the level of real output in the base year.E) None of the above
F) C) and D)

Question 3

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

The CPI measures the cost of a...

Question 5

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) All of the above
F) A) and D)

Question 6

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates.From this you conclude

Accepted Answer

A)   there were serious episodes of deflation in the time frame represented on the graph.
B)   consumer prices were always rising in the time frame represented on the graph.
C)   the economy never experienced a recession in the time frame represented on the graph.
D)   GDP was always increasing for the time frame represented on the graph.E) B) and C)
F) C) and D)

Question 7

Table 11-11.Megan's salary for three consecutive years,along with other values,are presented in the table below.
 
-Refer to Table 11-11.Suppose the consumer price index for 2010 is not necessarily 233.2.Then Megan's 2010 salary represents more purchasing power than her 2008 salary as long as the consumer price index for 2010 is

Accepted Answer

A)   greater than 240.00.
B)   less than 240.00.
C)   greater than 233.33.
D)   less than 233.33.E) A) and B)
F) A) and D)

Question 8

When the quality of a good improves while its price remains the same,the purchasing power of the dollar

Accepted Answer

A)   increases,so the CPI overstates the change in the cost of living if the quality change is not accounted for.
B)   increases,so the CPI understates the change in the cost of living if the quality change is not accounted for.
C)   decreases,so the CPI overstates the change in the cost of living if the quality change is not accounted for.
D)   decreases,so the CPI understates the change in the cost of living if the quality change is not accounted for.E) A) and B)
F) C) and D)

Question 9

An increase in the price of bread produced domestically will be reflected in

Accepted Answer

A)   both the GDP deflator and the consumer price index.
B)   neither the GDP deflator nor the consumer price index.
C)   the GDP deflator but not in the consumer price index.
D)   the consumer price index but not in the GDP deflator.E) None of the above
F) A) and B)

Question 10

Table 11-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below.
 
-Refer to Table 11-12.Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670.Then

Accepted Answer

A)   the consumer price index was 11.8 percent higher in 2011 than it was in 2009.
B)   the inflation rate in 2011 was 8 percent.
C)   Will's 2011 food expenditures in 2009 dollars amount to $5,740.
D)   Will's 2010 food expenditures in 2011 dollars amount to $6,210.E) A) and B)
F) A) and C)

Question 11

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Accepted Answer

A)   The real interest rate is the nominal interest rate times the rate of inflation.
B)   The real interest rate is the nominal interest rate minus the rate of inflation.
C)   The real interest rate is the nominal interest rate plus the rate of inflation.
D)   The real interest rate is the nominal interest rate divided by the rate of inflation.E) B) and D)
F) A) and B)

Question 12

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 13

The price index was 150 in the first year,160 in the second year,and 165 in the third year.Which of the following statements is correct?

Accepted Answer

A)   The price level was higher in the second year than in the first year,and it was higher in the third year than in the second year.
B)   The inflation rate was positive between the first and second years,and it was positive between the second and third years.
C)   The inflation rate was lower between the second and third years than it was between the first and second years.
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 14

If the real interest rate is 6.8% and the inflation rate is 3.9%,what is the nominal interest rate?

Accepted Answer

The nomina...

Question 15

If the nominal interest rate is 4 percent and the real interest rate is 7 percent,then the inflation rate is

Accepted Answer

A)   -3 percent.
B)   0.75 percent.
C)   3 percent.
D)   11 percent.E) B) and D)
F) B) and C)

Question 16

Suppose that the CPI in 1990 was 150,that the inflation rate in 1991 was 6%,and that the inflation rate in 1992 was 4%.What was the CPI in 1991 and 1992?

Accepted Answer

The CPI in 1991 was ...

Question 17

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

Accepted Answer

A)   substitution bias
B)   introduction of new goods
C)   unmeasured quality change
D)   income biasE) None of the above
F) B) and D)

Question 18

Which of the following is correct?

Accepted Answer

A)   Nominal and real interest rates always move together.
B)   Nominal and real interest rates never move together.
C)   Nominal and real interest rates do not always move together.
D)   Nominal and real interest rates always move in opposite directions.E) B) and C)
F) A) and B)

Question 19

The consumer price index was 225 in 2006 and 234 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

Accepted Answer

A)   2.5 percent
B)   4.0 percent
C)   6.76 percent
D)   10.5 percentE) B) and C)
F) B) and D)

Question 20

Table 11-4
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 11-4.The cost of the basket

Accepted Answer

A)   increased from 2004 to 2005 and increased from 2005 to 2006.
B)   increased from 2004 to 2005 and decreased from 2005 to 2006.
C)   decreased from 2004 to 2005 and increased from 2005 to 2006.
D)   decreased from 2004 to 2005 and decreased from 2005 to 2006.E) None of the above
F) A) and B)

Exam 24: Measuring the Cost of Living

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

Correct Answer
verified

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

Correct Answer
verified

The price index was 150 in the first year,160 in the second year,and 165 in the third year.Which of the following statements is correct?

Correct Answer
verified

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

An increase in the price of bread produced domestically will be reflected in

Correct Answer
verified

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates.From this you conclude

Correct Answer
verified

Suppose that the CPI in 1990 was 150,that the inflation rate in 1991 was 6%,and that the inflation rate in 1992 was 4%.What was the CPI in 1991 and 1992?

Correct Answer
verified
The CPI in 1991 was ...
View Answer

Table 11-4 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 11-4.The cost of the basket

Correct Answer
verified

If the real interest rate is 6.8% and the inflation rate is 3.9%,what is the nominal interest rate?

Correct Answer
verified
The nomina...
View Answer

Table 11-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below. -Refer to Table 11-12.Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670.Then

Correct Answer
verified

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

Which of the following is correct?

Correct Answer
verified

The consumer price index was 225 in 2006 and 234 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

Correct Answer
verified

If the nominal interest rate is 4 percent and the real interest rate is 7 percent,then the inflation rate is

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

Correct Answer
verified

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Correct Answer
verified

Table 24-1 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 24-1.If 2008 is the base year,then the consumer price index was

Correct Answer
verified

When the quality of a good improves while its price remains the same,the purchasing power of the dollar

Correct Answer
verified

The GDP deflator reflects the

Correct Answer
verified

Exam 24: Measuring the Cost of Living

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

Correct AnswerverifiedShow Answer

Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the typical consumer's budget.

Correct AnswerverifiedShow Answer

The price index was 150 in the first year,160 in the second year,and 165 in the third year.Which of the following statements is correct?

Correct AnswerverifiedShow 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

An increase in the price of bread produced domestically will be reflected in

Correct AnswerverifiedShow Answer

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates.From this you conclude

Correct AnswerverifiedShow Answer

Suppose that the CPI in 1990 was 150,that the inflation rate in 1991 was 6%,and that the inflation rate in 1992 was 4%.What was the CPI in 1991 and 1992?

Correct AnswerverifiedThe CPI in 1991 was ...View AnswerShow Answer

Table 11-4 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 11-4.The cost of the basket

Correct AnswerverifiedShow Answer

If the real interest rate is 6.8% and the inflation rate is 3.9%,what is the nominal interest rate?

Correct AnswerverifiedThe nomina...View AnswerShow Answer

Table 11-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below. -Refer to Table 11-12.Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670.Then

Correct AnswerverifiedShow 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

Which of the following is correct?

Correct AnswerverifiedShow Answer

The consumer price index was 225 in 2006 and 234 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

Correct AnswerverifiedShow Answer

If the nominal interest rate is 4 percent and the real interest rate is 7 percent,then the inflation rate is

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

Correct AnswerverifiedShow Answer

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Correct AnswerverifiedShow Answer

Table 24-1 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 24-1.If 2008 is the base year,then the consumer price index was

Correct AnswerverifiedShow Answer

When the quality of a good improves while its price remains the same,the purchasing power of the dollar

Correct AnswerverifiedShow Answer

The GDP deflator reflects the

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
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The CPI in 1991 was ...
View Answer

Correct Answer
verified

Correct Answer
verified
The nomina...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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