Question 1

The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?

Accepted Answer

A)   1.04 percent
B)   4.41 percent
C)   6.00 percent
D)   42.00 percentE) All of the above
F) A) and B)

Question 2

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)   a typical firm.
B)   the government.
C)   a typical consumer.
D)   All of the above are correct.E) All of the above
F) A) and D)

Question 4

Suppose the quality of televisions changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be most severe?

Accepted Answer

A)   The quality of televisions deteriorates and televisions become more expensive relative to other goods.
B)   The quality of televisions improves and televisions become less expensive relative to other goods.
C)   The quality of televisions improves and televisions become more expensive relative to other goods.
D)   The quality of televisions deteriorates and the price of televisions relative to other prices remains unchanged.E) B) and C)
F) A) and D)

Question 5

Consumer spending in what category is the largest component of the CPI?

Accepted Answer

The answer of Consumer spending in what category is the...

Question 6

Suppose Stan Musial earned $115,000 in 1947. If the CPI was 82 in 1947, and was 246 in 1990, what is Stan Musial's 1947 salary in 1990 dollars?

Accepted Answer

Stan Musial's 1947 s...

Question 7

When new goods are introduced, consumers have more variety from which to choose. As a result, each dollar is worth

Accepted Answer

A)   more, and the cost of living increases.
B)   more, and the cost of living decreases.
C)   less, and the cost of living increases.
D)   less, and the cost of living decreases.E) A) and C)
F) None of the above

Question 8

If the nominal interest rate is 5 percent, and the rate of inflation is 3 percent, then the real interest rate is equal to

Accepted Answer

A)   2 percent.
B)   0.6 percent.
C)   1.7 percent.
D)   15 percent.E) A) and C)
F) B) and D)

Question 9

In the calculation of the CPI, tea is given greater weight than beer if

Accepted Answer

A)   the price of tea is higher than the price of beer.
B)   it costs more to produce tea than it costs to produce beer.
C)   tea is more readily available than beer to the typical consumer.
D)   consumers buy more tea than beer.E) All of the above
F) None of the above

Question 10

Changes in the consumer price index are useful in predicting changes in the producer price index.

Accepted Answer

A) True 
 B)False

Question 11

Suppose the price for one gallon of gasoline rises from $3.50 to $4.00 and the price of one gallon of milk rises from $3.00 to $3.20. If the CPI rises from 120 to 132, then people likely will buy

Accepted Answer

A)   more gasoline and more milk.
B)   more gasoline and fewer milk.
C)   less gasoline and more milk.
D)   less gasoline and fewer milk.E) A) and B)
F) All of the above

Question 12

The real interest rate measures the change in dollar amounts.

Accepted Answer

A) True 
 B)False

Question 13

In 1986, Ken bought a Ford Mustang for $8,000. If the price index was 122 in 1986 and the price index was 280 in 2011, then what is the price of the Mustang in 2011 dollars?

Accepted Answer

A)   $3,485.71
B)   $8,100.71
C)   $18,360.66
D)   $22,400.00E) All of the above
F) A) and B)

Question 14

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

Question 15

Which of the following is the correct formula for calculating the consumer price index?

Accepted Answer

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

Question 16

The CPI is a measure of the overall cost of

Accepted Answer

A)   the inputs purchased by a typical producer.
B)   the goods and services purchased by a typical consumer.
C)   the goods and services produced in the economy.
D)   the stocks on the New York Stock Exchange.E) B) and C)
F) A) and D)

Question 17

Table 24-9
The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period.
 
-Refer to Table 24-9. What is the consumer price index for May?

Accepted Answer

A)   60
B)   132
C)   166
D)   123E) A) and B)
F) All of the above

Question 18

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

Accepted Answer

A)   $35,000.00.
B)   $46,666.67.
C)   $61,950.00
D)   $105,000.00.E) None of the above
F) All of the above

Question 19

Which of the following is correct?

Accepted Answer

A)   The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers.
B)   The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers.
C)   The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers.
D)   The GDP deflator is more commonly used as a gauge of inflation than the CPI is.E) B) and D)
F) All of the above

Question 20

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) All of the above
F) None of the above

Exam 16: Measuring the Cost of Living

Table 24-9 The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. -Refer to Table 24-9. What is the consumer price index for May?

Correct AnswerverifiedShow Answer

Consumer spending in what category is the largest component of the CPI?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the nominal interest rate is 5 percent, and the rate of inflation is 3 percent, then the real interest rate is equal to

Correct AnswerverifiedShow Answer

Suppose the quality of televisions changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be most severe?

Correct AnswerverifiedShow Answer

When new goods are introduced, consumers have more variety from which to choose. As a result, each dollar is worth

Correct AnswerverifiedShow Answer

The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The CPI is a measure of the overall cost of

Correct AnswerverifiedShow Answer

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

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

Which of the following is the correct formula for calculating the consumer price index?

Correct AnswerverifiedShow Answer

Suppose the price for one gallon of gasoline rises from $3.50 to $4.00 and the price of one gallon of milk rises from $3.00 to $3.20. If the CPI rises from 120 to 132, then people likely will buy

Correct AnswerverifiedShow Answer

The real interest rate measures the change in dollar amounts.

Correct AnswerverifiedShow Answer

In the calculation of the CPI, tea is given greater weight than beer if

Correct AnswerverifiedShow Answer

Changes in the consumer price index are useful in predicting changes in the producer price index.

Correct AnswerverifiedShow Answer

Which of the following is correct?

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In 1986, Ken bought a Ford Mustang for $8,000. If the price index was 122 in 1986 and the price index was 280 in 2011, then what is the price of the Mustang in 2011 dollars?

Correct AnswerverifiedShow Answer

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

Correct AnswerverifiedShow Answer

Suppose Stan Musial earned $115,000 in 1947. If the CPI was 82 in 1947, and was 246 in 1990, what is Stan Musial's 1947 salary in 1990 dollars?

Correct AnswerverifiedStan Musial's 1947 s...View AnswerShow Answer

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Stan Musial's 1947 s...
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