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Exam 16: Measuring the Cost of Living

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Question 261

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Which of the following is not correct?

A) If the inflation rate exceeds the nominal interest rate, then the purchasing power of an interest-earning deposit falls over time.
B) If there is deflation, then the purchasing power of an interest-earning deposit rises by more than the nominal interest rate over time.
C) The higher the rate of inflation, the smaller the increase in the purchasing power of an interest-earning deposit.
D) The purchasing power of an interest-earning deposit can increase or decrease over time, but it cannot stay the same.

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

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Question 262

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Which of the following is not a widely acknowledged problem with using the CPI as a measure of the cost of living?

A) substitution bias
B) introduction of new goods
C) unmeasured quality change
D) unmeasured price change

E) All of the above
F) A) and B)

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Question 263

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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 2013 is the base year, then the inflation rate in 2013 was

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

The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent and the real interest rate is 4.5 percent. If the consumer price index was 200 in 2007, what would the consumer price index value be in 2008?

The CPI and GDP deflator usually tell two different stories about how quickly prices are rising.

If the CPI was 108.00 in 1942 and is 336.96 today, then $10 in 1942 purchased the same amount of goods and services as

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

From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the inflation rate for medical care?

For an imaginary economy, the consumer price index was 115.00 in 2004, 126.50 in 2005, and 136.62 in 2006. Which of the following statements is correct?

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

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

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,750. Then the inflation rate for 2011 is about

If the cost of food & beverages increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Each week, the Bureau of Labor Statistics computes and reports the consumer price index.

If the price of Spanish olives imported into the United States decreases, then

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

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. What are the prices of books, CDs, and DVDs in 2009?

The primary purpose of measuring the overall level of prices in the economy is to

Suppose that the price of one gallon of milk was $0.25 in 1950, that the CPI in 1950 was 25, and that in 2000 the CPI was 200.What is the price of a 1950 gallon of milk in 2000 dollars?