Question 1

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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. The cost of the basket

Accepted Answer

A)   increased from 2013 to 2014 and increased from 2014 to 2015.
B)   increased from 2013 to 2014 and decreased from 2014 to 2015.
C)   decreased from 2013 to 2014 and increased from 2014 to 2015.
D)   decreased from 2013 to 2014 and decreased from 2014 to 2015.E) A) and C)
F) All of the above

Question 4

Every unit of good x that is produced in the United States is exported to other countries. An increase in the price of good x shows up

Accepted Answer

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

Question 5

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players, we find that the current median salary of today's Yankees is

Accepted Answer

A)   about three quarters of Ruth's salary.
B)   about the same as Ruth's salary.
C)   about twice Ruth's salary.
D)   more than four times Ruth's salary.E) A) and C)
F) None of the above

Question 6

Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator.

Accepted Answer

The CPI focuses on goods and services bo...

Question 7

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 CPI for 2012 was

Accepted Answer

A)   75.3.
B)   100.0.
C)   116.0.
D)   132.8.E) B) and C)
F) A) and D)

Question 8

If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount of goods and services as

Accepted Answer

A)   $23.86 purchased in 1965.
B)   $32.47 purchased in 1965.
C)   $68.00 purchased in 1965.
D)   $419.12 purchased in 1965.E) B) and C)
F) B) and D)

Question 9

Assume that consumers consider rice and potatoes to be substitutes, so that when the price of rice rises, consumers purchase less rice and more potatoes. When the CPI is computed following the increase in the price of rice, it takes into account

Accepted Answer

A)   the increase in the price of rice.
B)   the decrease in the quantity of rice purchased and the increase in the quantity of potatoes purchased.
C)   Both a)  and b)  are correct.
D)   None of the above is correct.E) B) and D)
F) All of the above

Question 10

If 2012 is the base year, then the inflation rate for 2012 equals

Accepted Answer

A)   
B)   
C)   
D)   E) B) and C)
F) None of the above

Question 11

The inflation rate is calculated

Accepted Answer

A)   by determining the change in the price index from the preceding period.
B)   by determining the change in the price index from the base year.
C)   by determining the percentage change in the price index from the preceding period.
D)   by determining the percentage change in the price index from the base year.E) B) and C)
F) C) and D)

Question 12

The relative importance of housing in the breakdown of consumer spending is

Accepted Answer

A)   41 percent.
B)   15 percent.
C)   6 percent.
D)   4 percent.E) A) and B)
F) None of the above

Question 13

With respect to the consumer price index, the substitution bias arises because

Accepted Answer

A)   prices of goods and services do not change in the same proportion from year to year.
B)   consumers are slow to adjust their buying patterns from year to year in response to price changes.
C)   consumers are eager to buy new products as they are introduced, despite their lack of full information about the quality of those products until they buy and use them.
D)   All of the above are correct.E) A) and C)
F) All of the above

Question 14

Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013.
-Refer to Scenario 24-3. In real terms, Josh Holloway's income amounts to about what percentage of Sue Holloway's income?

Accepted Answer

A)   71 percent
B)   141 percent
C)   165 percent
D)   198 percentE) A) and C)
F) All of the above

Question 15

Table 24-6
The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.
 
-Refer to Table 24-6. If the base year is 2009, then the consumer price index was

Accepted Answer

A)   100 in 2009, 115 in 2010, and 116 in 2011.
B)   100 in 2009, 115 in 2010, and 135 in 2011.
C)   100 in 2009, 120 in 2010, and 116 in 2011.
D)   120 in 2009, 125 in 2010, and 135 in 2011.E) A) and D)
F) B) and C)

Question 16

The Bureau of Labor Statistics is part of the U.S. Department of Labor.

Accepted Answer

A) True 
 B)False

Question 17

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 12 percent.

Accepted Answer

A) True 
 B)False

Question 18

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

Question 19

Table 24-2
The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans.
 
-Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was

Accepted Answer

A)   95.7.
B)   100.0.
C)   90.0.
D)   213.6.E) A) and C)
F) A) and D)

Question 20

Suppose today's CPI is 134.85, and suppose one must spend $580 today to purchase the same basket of goods and services that could be bought for $400 in 1989. Then the CPI in 1989 was

Accepted Answer

A)   24.27.
B)   60.68.
C)   93.00.
D)   195.53.E) B) and C)
F) A) and B)

Exam 16: Measuring the Cost of Living

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

The relative importance of housing in the breakdown of consumer spending is

Correct Answer
verified

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 12 percent.

Correct Answer
verified

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. If the base year is 2009, then the consumer price index was

Correct Answer
verified

The Bureau of Labor Statistics is part of the U.S. Department of Labor.

Correct Answer
verified

Assume that consumers consider rice and potatoes to be substitutes, so that when the price of rice rises, consumers purchase less rice and more potatoes. When the CPI is computed following the increase in the price of rice, it takes into account

Correct Answer
verified

Correct Answer
verified

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Correct Answer
verified

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was

Correct Answer
verified

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 CPI for 2012 was

Correct Answer
verified

Every unit of good x that is produced in the United States is exported to other countries. An increase in the price of good x shows up

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

With respect to the consumer price index, the substitution bias arises because

Correct Answer
verified

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. The cost of the basket

Correct Answer
verified

If 2012 is the base year, then the inflation rate for 2012 equals

Correct Answer
verified

Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator.

Correct Answer
verified
The CPI focuses on goods and services bo...
View Answer

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players, we find that the current median salary of today's Yankees is

Correct Answer
verified

Suppose today's CPI is 134.85, and suppose one must spend $580 today to purchase the same basket of goods and services that could be bought for $400 in 1989. Then the CPI in 1989 was

Correct Answer
verified

The inflation rate is calculated

Correct Answer
verified

If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount of goods and services as

Correct Answer
verified

Exam 16: Measuring the Cost of Living

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

The relative importance of housing in the breakdown of consumer spending is

Correct AnswerverifiedShow Answer

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 12 percent.

Correct AnswerverifiedShow Answer

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. If the base year is 2009, then the consumer price index was

Correct AnswerverifiedShow Answer

The Bureau of Labor Statistics is part of the U.S. Department of Labor.

Correct AnswerverifiedShow Answer

Assume that consumers consider rice and potatoes to be substitutes, so that when the price of rice rises, consumers purchase less rice and more potatoes. When the CPI is computed following the increase in the price of rice, it takes into account

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Correct AnswerverifiedShow Answer

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was

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 2013 is the base year, then the CPI for 2012 was

Correct AnswerverifiedShow Answer

Every unit of good x that is produced in the United States is exported to other countries. An increase in the price of good x shows up

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

With respect to the consumer price index, the substitution bias arises because

Correct AnswerverifiedShow Answer

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. The cost of the basket

Correct AnswerverifiedShow Answer

If 2012 is the base year, then the inflation rate for 2012 equals

Correct AnswerverifiedShow Answer

Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator.

Correct AnswerverifiedThe CPI focuses on goods and services bo...View AnswerShow Answer

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players, we find that the current median salary of today's Yankees is

Correct AnswerverifiedShow Answer

Suppose today's CPI is 134.85, and suppose one must spend $580 today to purchase the same basket of goods and services that could be bought for $400 in 1989. Then the CPI in 1989 was

Correct AnswerverifiedShow Answer

The inflation rate is calculated

Correct AnswerverifiedShow Answer

If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount of goods and services as

Correct AnswerverifiedShow Answer

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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Correct Answer
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The CPI focuses on goods and services bo...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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