Question 1

If the real interest rate is 6.8% and the inflation rate is 3.9%, what is the nominal interest rate?

Accepted Answer

The nomina...

Question 2

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

Accepted Answer

A)   95.7.
B)   100.0.
C)   90.0.
D)   110.0.E) All of the above
F) None of the above

Question 3

Suppose the price index was 100 in 2014, 109 in 2015, and the inflation rate was lower between 2015 and 2016 than it was between 2014 and 2015. This means that

Accepted Answer

A)   the price index in 2016 was lower than 109.0.
B)   the price index in 2016 was lower than 118.9.
C)   the price index in 2016 was lower than 118.0.
D)   the inflation rate between 2015 and 2016 was lower than 1.09 percent.E) A) and B)
F) A) and C)

Question 4

The content of the basket of goods and services used to compute the CPI changes every month.

Accepted Answer

A) True 
 B)False

Question 5

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. Between 2010 and 2011, the cost of living increased by

Accepted Answer

A)   5.30 percent.
B)   6.36 percent.
C)   7.78 percent.
D)   We need to know the base year in order to answer this question.E) None of the above
F) All of the above

Question 6

The price index was 128 in 2013, and the inflation rate was 24 percent between 2012 and 2013. The price index in 2012 was

Accepted Answer

A)   104.0.
B)   103.2.
C)   158.7.
D)   152.0.E) B) and C)
F) A) and C)

Question 7

The CPI differs from the GDP deflator in that

Accepted Answer

A)   the CPI is a price index, while the GDP deflator is an inflation index.
B)   substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.
C)   increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator.
D)   increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator.E) None of the above
F) B) and C)

Question 8

If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $43,333.33 in five years to have kept pace with consumer price inflation.

Accepted Answer

A) True 
 B)False

Question 9

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Accepted Answer

A)   Try to include all the goods and services that the typical consumer buys.
B)   Try to weight the goods and services that the typical consumer buys according to how much consumers buy of each item.
C)   Survey consumers to determine what the typical consumer buys.
D)   Survey sellers to determine what the typical consumer buys.E) B) and C)
F) A) and C)

Question 10

The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

Accepted Answer

A)   the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 6 percent.
B)   the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 8 percent.
C)   the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 4 percent.
D)   the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 6 percent.E) C) and D)
F) A) and C)

Question 12

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 2011, then the consumer price index was

Accepted Answer

A)   125.0 in 2009, 150.0 in 2010, and 145.0 in 2011.
B)   86.2 in 2009, 96.7 in 2010, and 100.0 in 2011.
C)   86.2 in 2009, 103.4 in 2010, and 100.0 in 2011.
D)   124.1 in 2009, 103.4 in 2010, and 100.0 in 2011.E) A) and C)
F) A) and D)

Question 13

Scenario 24-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost

Accepted Answer

A)   $0.55, so golf balls were cheaper in 1975.
B)   $0.55, so golf balls were cheaper in 2005.
C)   $7.32, so golf balls were cheaper in 1975.
D)   $7.32, so golf balls were cheaper in 2005.E) A) and B)
F) None of the above

Question 14

Social Security payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation. Which of the following statements is correct?

Accepted Answer

A)   The newspaper editorial is correct under all circumstances.
B)   The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI.
C)   The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI
D)   The newspaper editorial is incorrect under all circumstances.E) All of the above
F) A) and B)

Question 15

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 2012 is the base year, then the inflation rate in 2013 was

Accepted Answer

A)   23.5 percent.
B)   1.04 percent.
C)   10 percent.
D)   4.4 percent.E) All of the above
F) C) and D)

Question 16

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

Question 17

Suppose the nominal interest rate this year is 6.5% and that the economy experiences 2.3% deflation. What is the real interest rate?

Accepted Answer

The real i...

Question 18

Between October 2014 and October 2015, the CPI in Canada rose from 120 to 124 and the CPI in Mexico rose from 210 to 229.1. What were the inflation rates for Canada and Mexico over this one-year period?

Accepted Answer

A)   3.3 percent for Canada and 9.1 percent for Mexico
B)   3.3 percent for Canada and 8.3 percent for Mexico
C)   3.2 percent for Canada and 9.1 percent for Mexico
D)   3.2 percent for Canada and 8.3 percent for MexicoE) C) and D)
F) B) and C)

Question 19

Scenario 24-4
Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90.
-Refer to Scenario 24-4. If Quinn only cares about maximizing her purchasing power, then she should

Accepted Answer

A)   take the Charlieville job.
B)   take the Wrexington job.
C)   take either job because they both have the same purchasing power.
D)   The answer cannot be determined from the information given because a salary is not the same as purchasing power.E) B) and C)
F) C) and D)

Question 20

By far the largest category of goods and services in the CPI basket is

Accepted Answer

A)   housing.
B)   transportation.
C)   education & communication.
D)   food & beverages.E) B) and C)
F) A) and D)

Exam 16: Measuring the Cost of Living

When box office receipts are not corrected for inflation,

Correct Answer
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Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost

Correct Answer
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Correct Answer
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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 2012 is the base year, then the inflation rate in 2013 was

Correct Answer
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The CPI differs from the GDP deflator in that

Correct Answer
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If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $43,333.33 in five years to have kept pace with consumer price inflation.

Correct Answer
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When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Correct Answer
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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. Between 2010 and 2011, the cost of living increased by

Correct Answer
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Between October 2014 and October 2015, the CPI in Canada rose from 120 to 124 and the CPI in Mexico rose from 210 to 229.1. What were the inflation rates for Canada and Mexico over this one-year period?

Correct Answer
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If the real interest rate is 6.8% and the inflation rate is 3.9%, what is the nominal interest rate?

Correct Answer
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The nomina...
View Answer

The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

Correct Answer
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Suppose the price index was 100 in 2014, 109 in 2015, and the inflation rate was lower between 2015 and 2016 than it was between 2014 and 2015. This means that

Correct Answer
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The content of the basket of goods and services used to compute the CPI changes every month.

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

Correct Answer
verified

The price index was 128 in 2013, and the inflation rate was 24 percent between 2012 and 2013. The price index in 2012 was

Correct Answer
verified

Correct Answer
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Suppose the nominal interest rate this year is 6.5% and that the economy experiences 2.3% deflation. What is the real interest rate?

Correct Answer
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The real i...
View 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 2011, then the consumer price index was

Correct Answer
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By far the largest category of goods and services in the CPI basket is

Correct Answer
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Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

Correct Answer
verified

Exam 16: Measuring the Cost of Living

When box office receipts are not corrected for inflation,

Correct AnswerverifiedShow Answer

Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost

Correct AnswerverifiedShow Answer

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 2012 is the base year, then the inflation rate in 2013 was

Correct AnswerverifiedShow Answer

The CPI differs from the GDP deflator in that

Correct AnswerverifiedShow Answer

If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $43,333.33 in five years to have kept pace with consumer price inflation.

Correct AnswerverifiedShow Answer

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Correct AnswerverifiedShow Answer

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. Between 2010 and 2011, the cost of living increased by

Correct AnswerverifiedShow Answer

Between October 2014 and October 2015, the CPI in Canada rose from 120 to 124 and the CPI in Mexico rose from 210 to 229.1. What were the inflation rates for Canada and Mexico over this one-year period?

Correct AnswerverifiedShow Answer

If the real interest rate is 6.8% and the inflation rate is 3.9%, what is the nominal interest rate?

Correct AnswerverifiedThe nomina...View AnswerShow Answer

The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

Correct AnswerverifiedShow Answer

Suppose the price index was 100 in 2014, 109 in 2015, and the inflation rate was lower between 2015 and 2016 than it was between 2014 and 2015. This means that

Correct AnswerverifiedShow Answer

The content of the basket of goods and services used to compute the CPI changes every month.

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

Correct AnswerverifiedShow Answer

The price index was 128 in 2013, and the inflation rate was 24 percent between 2012 and 2013. The price index in 2012 was

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the nominal interest rate this year is 6.5% and that the economy experiences 2.3% deflation. What is the real interest rate?

Correct AnswerverifiedThe real i...View AnswerShow 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 2011, then the consumer price index was

Correct AnswerverifiedShow Answer

By far the largest category of goods and services in the CPI basket is

Correct AnswerverifiedShow Answer

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

Correct AnswerverifiedShow Answer

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The nomina...
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The real i...
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