Question 1

When box office receipts are not corrected for inflation,

Accepted Answer

A)   The Sound of Music ranks as the most popular movie of all time.
B)   Gone with the Wind does not rank as one of the 50 most popular movies of all time.
C)   Titanic ranks as the most popular movie of all time.
D)   Avatar does not rank as one of the 50 most popular movies of all time.E) All of the above
F) B) and D)

Question 2

Table 6-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.
 
-Refer to Table 6-6. If the base year is 2010, then the consumer price index is

Accepted Answer

A)   100 in 2009, 109 in 2010, and 115 in 2011.
B)   95.90 in 2009, 100 in 2010, and 107.44 in 2011.
C)   90.91 in 2009, 100 in 2010, and 106.36 in 2011.
D)   88.82 in 2009, 100 in 2010, and 107.44 in 2011.E) None of the above
F) B) and C)

Question 3

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) C) and D)
F) A) and B)

Question 4

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in

Accepted Answer

A)   1980 and lowest in 1970.
B)   1980 and lowest in 1990.
C)   1990 and lowest in 1970.
D)   1990 and lowest in 1980.E) B) and C)
F) A) and B)

Question 5

Data from the Bureau of Labor Statistics show that consumer spending on medical care is about equal to consumer spending on recreation and consumer spending on education and communication.

Accepted Answer

A) True 
 B)False

Question 6

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 inflation rate in 2007 was 16 percent, then how much did a magazine cost in 2007?

Accepted Answer

A)   $1.87
B)   $2.08
C)   $2.32
D)   $3.00E) None of the above
F) B) and D)

Question 7

The price index was 220 in one year and 260 in the next year. What was the inflation rate?

Accepted Answer

A)   9.0 percent
B)   114.6 percent
C)   18.2 percent
D)   40.0 percentE) C) and D)
F) A) and D)

Question 8

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)   food & beverages
B)   recreation
C)   housing
D)   apparelE) None of the above
F) A) and C)

Question 9

Elizabeth just received her Ph.D. in economics and has two competing job offers. The first is in Washington, D.C. and pays a salary of $200,000. She has a similar job offer in Austin, TX that pays $90,000. Which pair of CPIs would make the two salaries have the same purchasing power?

Accepted Answer

A)   70 in Washington, D.C. and 42 in Austin, TX
B)   140 in Washington, D.C. and 70 in Austin, TX
C)   160 in Washington, D.C. and 72 in Austin, TX
D)   210 in Washington, D.C. and 150 in Austin, TXE) B) and C)
F) B) and D)

Question 10

In 1974, one could buy a theater for $1.25. Today the same theater ticket costs $6.50. Which pair of CPIs would imply that the cost in today's dollars was the same for both tickets?

Accepted Answer

A)   60 in 1964 and 390 today
B)   75 in 1964 and 390 today
C)   80 in 1964 and 404 today
D)   95 in 1964 and 475 todayE) All of the above
F) A) and B)

Question 11

In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?

Accepted Answer

A)   The base year is always the first year among the years for which computations are being made.
B)   It is necessary to designate a base year only in the simplest case of two goods; in more realistic cases, it is not necessary to designate a base year.
C)   The value of the consumer price index is always 100 in the base year.
D)   The base year is always the year in which the cost of the basket was highest among the years for which computations are being made.E) C) and D)
F) B) and C)

Question 12

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

Accepted Answer

A)   GDP will increase in 2011.
B)   the producer price index will increase by more than 1.5 percent in 2011.
C)   interest rates will decrease in the future.
D)   the consumer price index will increase in the future.E) B) and C)
F) All of the above

Question 13

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

Accepted Answer

A) True 
 B)False

Question 14

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Accepted Answer

A) True 
 B)False

Question 15

Table 6-3
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 6-3. The cost of the basket in 2006 was

Accepted Answer

A)   $32.
B)   $200.
C)   $280.
D)   $480.E) A) and B)
F) B) and D)

Question 16

When a new good is introduced, consumers have more variety from which to choose, and this in turn increases the cost of maintaining the same level of economic well-being.

Accepted Answer

A) True 
 B)False

Question 17

A decrease in the price of domestically produced industrial robots 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 18

Which of these events would cause the consumer price index to overstate the increase in the cost of living?

Accepted Answer

A)   Car makers benefit from a new technology that allows them to sell higher-quality cars to consumers with no increase in price.
B)   Energy prices decrease, and consumers respond by buying more gas and electricity.
C)   A new good is introduced that renders cellular telephones inferior and obsolete.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 19

The inflation rate reported in the news is usually calculated from the GDP deflator rather than the consumer price index.

Accepted Answer

A) True 
 B)False

Question 20

For purposes of calculating the CPI, the transportation category of consumer spending includes the cost of

Accepted Answer

A)   subways.
B)   gasoline.
C)   both subways and gasoline.
D)   neither subways nor gasoline.E) A) and B)
F) A) and C)

Exam 6: Measuring the Cost of Living

Table 6-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 6-6. If the base year is 2010, then the consumer price index is

Correct Answer
verified

The inflation rate reported in the news is usually calculated from the GDP deflator rather than the consumer price index.

Correct Answer
verified

Elizabeth just received her Ph.D. in economics and has two competing job offers. The first is in Washington, D.C. and pays a salary of $200,000. She has a similar job offer in Austin, TX that pays $90,000. Which pair of CPIs would make the two salaries have the same purchasing power?

Correct Answer
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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
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Correct Answer
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In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in

Correct Answer
verified

Which of these events would cause the consumer price index to overstate the increase in the cost of living?

Correct Answer
verified

For purposes of calculating the CPI, the transportation category of consumer spending includes the cost of

Correct Answer
verified

Table 6-3 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 6-3. The cost of the basket in 2006 was

Correct Answer
verified

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Correct Answer
verified

In 1974, one could buy a theater for $1.25. Today the same theater ticket costs $6.50. Which pair of CPIs would imply that the cost in today's dollars was the same for both tickets?

Correct Answer
verified

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

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

In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?

Correct Answer
verified

The price index was 220 in one year and 260 in the next year. What was the inflation rate?

Correct Answer
verified

Data from the Bureau of Labor Statistics show that consumer spending on medical care is about equal to consumer spending on recreation and consumer spending on education and communication.

Correct Answer
verified

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

Correct Answer
verified

When a new good is introduced, consumers have more variety from which to choose, and this in turn increases the cost of maintaining the same level of economic well-being.

Correct Answer
verified

A decrease in the price of domestically produced industrial robots will be reflected in

Correct Answer
verified

When box office receipts are not corrected for inflation,

Correct Answer
verified

Exam 6: Measuring the Cost of Living

Table 6-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 6-6. If the base year is 2010, then the consumer price index is

Correct AnswerverifiedShow Answer

The inflation rate reported in the news is usually calculated from the GDP deflator rather than the consumer price index.

Correct AnswerverifiedShow Answer

Elizabeth just received her Ph.D. in economics and has two competing job offers. The first is in Washington, D.C. and pays a salary of $200,000. She has a similar job offer in Austin, TX that pays $90,000. Which pair of CPIs would make the two salaries have the same purchasing power?

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

Correct AnswerverifiedShow Answer

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in

Correct AnswerverifiedShow Answer

Which of these events would cause the consumer price index to overstate the increase in the cost of living?

Correct AnswerverifiedShow Answer

For purposes of calculating the CPI, the transportation category of consumer spending includes the cost of

Correct AnswerverifiedShow Answer

Table 6-3 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 6-3. The cost of the basket in 2006 was

Correct AnswerverifiedShow Answer

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Correct AnswerverifiedShow Answer

In 1974, one could buy a theater for $1.25. Today the same theater ticket costs $6.50. Which pair of CPIs would imply that the cost in today's dollars was the same for both tickets?

Correct AnswerverifiedShow Answer

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

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

In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?

Correct AnswerverifiedShow Answer

The price index was 220 in one year and 260 in the next year. What was the inflation rate?

Correct AnswerverifiedShow Answer

Data from the Bureau of Labor Statistics show that consumer spending on medical care is about equal to consumer spending on recreation and consumer spending on education and communication.

Correct AnswerverifiedShow Answer

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

Correct AnswerverifiedShow Answer

When a new good is introduced, consumers have more variety from which to choose, and this in turn increases the cost of maintaining the same level of economic well-being.

Correct AnswerverifiedShow Answer

A decrease in the price of domestically produced industrial robots will be reflected in

Correct AnswerverifiedShow Answer

When box office receipts are not corrected for inflation,

Correct AnswerverifiedShow Answer

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