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Exam 6: Measuring the Cost of Living

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Question 21

True/False

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The Bureau of Labor Statistics determines which prices are most important to the typical consumer by surveying consumers.

A) True
B) False

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Question 22

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The GDP Deflator reflects

A) the prices of all final goods and services currently produced domestically, as does the CPI.
B) the price of a fixed basket of goods and services purchased by a typical consumer, as does the CPI.
C) the prices of all final goods and services currently produced domestically, while the CPI reflects the price of a fixed basket of goods and services purchased by a typical consumer.
D) the price of a fixed basket of goods and services purchased by a typical consumer, while the CPI reflects the prices of all final goods and services produced domestically.

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

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Question 23

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Table 24-4 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 24-4. The cost of the basket in 2012 was

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

You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in 1962 prices?

Table 24-7. 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 24-7. If the base year is 2010, then the economy's inflation rate is

Table 24-7. 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 24-7. Which of the following scenarios is consistent with this statement? "The cost of living increased by 25 percent between 2009 and 2011."

Table 24-10 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 24-10. The inflation rate was

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $48,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Changes in the producer price index are often thought to be useful in predicting changes in

Table 24-4 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 24-4. If 2013 is the base year, then the consumer price index was

Table 24-5 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 24-5. The cost of the basket

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

In the basket of goods that is used to compute the consumer price index, the three largest categories of consumer spending are

Table 24-16 The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year. -Refer to Table 24-16. Calculate the missing value that belongs in space C.

Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

The Bureau of Labor Statistics does not try to account for quality changes in the goods and services in the basket used to compute the CPI.

Scenario 24-6 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 24-6. Using 2011 as the base year, what is the inflation rate in 2011?

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. -Refer to Table 24-8. If the base year is 2013, then the consumer price index was