Question 1

The economy's inflation rate is the

Accepted Answer

A)   price level in the current period.
B)   change in the price level from the previous period.
C)   change in the gross domestic product from the previous period.
D)   percentage change in the price level from the previous period.E) None of the above
F) A) and B)

Question 2

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year.In 2002,the basket's cost was $50;in 2004,the basket's cost was $52;and in 2006,the basket's cost was $54.60.The value of the CPI in 2004 was

Accepted Answer

A)   96.2.
B)   102.0.
C)   104.0.
D)   152.0.E) All of the above
F) A) and B)

Question 3

Ralph puts money in the bank and earns a 5 percent nominal interest rate.If the inflation rate is 2 percent,then after one year,

Accepted Answer

A)   Ralph will have 3 percent more money,which will purchase 5 percent more goods.
B)   Ralph will have 3 percent more money,which will purchase 7 percent more goods.
C)   Ralph will have 5 percent more money,which will purchase 3 percent more goods.
D)   Ralph will have 5 percent more money,which will purchase 7 percent more goods.E) None of the above
F) All of the above

Question 4

Suppose the price index was 105 in 2007,115.5 in 2008,and the inflation rate was lower between 2008 and 2009 than it was between 2007 and 2008.This means that

Accepted Answer

A)   the price index in 2009 was lower than 115.5.
B)   the price index in 2009 was lower than 126.
C)   the price index in 2009 was lower than 127.05.
D)   the inflation rate between 2008 and 2009 was lower than 1.1 percent.E) A) and B)
F) B) and C)

Question 5

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) All of the above
F) B) and C)

Question 6

The consumer price index was 225 in 2006 and 236 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

Accepted Answer

A)   1.6 percent
B)   4.9 percent
C)   6.82 percent
D)   11.4 percentE) A) and B)
F) C) and D)

Question 7

In 1931,President Herbert Hoover was paid a salary of $75,000.Government statistics show a consumer price index of 15.2 for 1931 and 207 for 2007.President Hoover's 1931 salary was equivalent to a 2007 salary of about

Accepted Answer

A)   $5507.
B)   $1,021,382.
C)   $1,140,000.
D)   $15,525,000.E) B) and D)
F) B) and C)

Question 8

The CPI is calculated

Accepted Answer

A)   monthly by the Department of Commerce.
B)   monthly by the Bureau of Labor Statistics.
C)   quarterly by the Department of Commerce.
D)   quarterly by the Bureau of Labor Statistics.E) All of the above
F) B) and C)

Question 9

The price index was 120 in 2006 and 127.2 in 2007.What was the inflation rate?

Accepted Answer

A)   5.7 percent
B)   6.0 percent
C)   7.2 percent
D)   27.2 percentE) A) and D)
F) None of the above

Question 10

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Accepted Answer

A)   Economists agree that the bias in the CPI is a very serious problem.
B)   Economists agree that the bias in the CPI is not a serious problem.
C)   Economists agree on the severity of the CPI bias,but there is still debate on what to do about it.
D)   There is still debate among economists on the severity of the CPI bias and what to do about it.E) A) and D)
F) None of the above

Question 11

If the price index was 90 in year 1,100 in year 2,and 95 in year 3,then the economy experienced

Accepted Answer

A)   10 percent inflation between years 1 and 2 ,and 5 percent inflation between years 2 and 3.
B)   10 percent inflation between years 1 and 2,and 5 percent deflation between years 2 and 3.
C)   11.1 percent inflation between years 1 and 2,and 5 percent inflation between years 2 and 3.
D)   11.1 percent inflation between years 1 and 2,and 5 percent deflation between years 2 and 3.E) A) and B)
F) None of the above

Question 12

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

Accepted Answer

A)   clothing,but not footwear or jewelry.
B)   clothing and footwear,but not jewelry.
C)   clothing and jewelry,but not footwear.
D)   clothing,footwear,and jewelry.E) A) and B)
F) None of the above

Question 13

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006.The consumer price index was 177 in 2001 and 266 in 2006.Dewey's 2006 salary in 2001 dollars is

Accepted Answer

A)   $47,768.36.
B)   $63,214.29.
C)   $84,550.00.
D)   $142,768.36.E) A) and B)
F) A) and C)

Question 14

Henry Ford paid his workers $5 a day in 1914,when the CPI was 10.Today,with the price index at 177,the $5 a day is worth $88.50.

Accepted Answer

A) True 
 B)False

Question 15

Table 24-4
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 24-4.If the base year is 2004,then the inflation rate in 2006 was

Accepted Answer

A)   44.4%.
B)   50%.
C)   62.5%.
D)   80%.E) None of the above
F) B) and D)

Question 16

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent.A year later,Bob withdraws his $105.If inflation was 2 percent during the year the money was deposited,then Bob's purchasing power has increased by 3 percent.

Accepted Answer

A) True 
 B)False

Question 17

Suppose the price of gasoline increases rapidly and consumers respond by buying a smaller quantity of gasoline.The consumer price index

Accepted Answer

A)   reflects this price increase accurately.
B)   understates this price increase due to the substitution bias.
C)   overstates this price increase due to the income bias.
D)   overstates this price increase due to the substitution bias.E) All of the above
F) B) and C)

Question 18

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

Accepted Answer

A)   substitution bias
B)   introduction of new goods
C)   unmeasured quality change
D)   income biasE) None of the above
F) A) and B)

Exam 24: Measuring the Cost of Living

The consumer price index was 225 in 2006 and 236 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

Correct Answer
verified

The price index was 120 in 2006 and 127.2 in 2007.What was the inflation rate?

Correct Answer
verified

The economy's inflation rate is the

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 inflation was 2 percent during the year the money was deposited,then Bob's purchasing power has increased by 3 percent.

Correct Answer
verified

Henry Ford paid his workers $5 a day in 1914,when the CPI was 10.Today,with the price index at 177,the $5 a day is worth $88.50.

Correct Answer
verified

Suppose the price of gasoline increases rapidly and consumers respond by buying a smaller quantity of gasoline.The consumer price index

Correct Answer
verified

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

Correct Answer
verified

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year.In 2002,the basket's cost was $50;in 2004,the basket's cost was $52;and in 2006,the basket's cost was $54.60.The value of the CPI in 2004 was

Correct Answer
verified

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

The CPI is calculated

Correct Answer
verified

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Correct Answer
verified

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006.The consumer price index was 177 in 2001 and 266 in 2006.Dewey's 2006 salary in 2001 dollars is

Correct Answer
verified

If the price index was 90 in year 1,100 in year 2,and 95 in year 3,then the economy experienced

Correct Answer
verified

Suppose the price index was 105 in 2007,115.5 in 2008,and the inflation rate was lower between 2008 and 2009 than it was between 2007 and 2008.This means that

Correct Answer
verified

In 1931,President Herbert Hoover was paid a salary of $75,000.Government statistics show a consumer price index of 15.2 for 1931 and 207 for 2007.President Hoover's 1931 salary was equivalent to a 2007 salary of about

Correct Answer
verified

Table 24-4 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 24-4.If the base year is 2004,then the inflation rate in 2006 was

Correct Answer
verified

Ralph puts money in the bank and earns a 5 percent nominal interest rate.If the inflation rate is 2 percent,then after one year,

Correct Answer
verified

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

Correct Answer
verified

Exam 24: Measuring the Cost of Living

The consumer price index was 225 in 2006 and 236 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

Correct AnswerverifiedShow Answer

The price index was 120 in 2006 and 127.2 in 2007.What was the inflation rate?

Correct AnswerverifiedShow Answer

The economy's inflation rate is the

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 inflation was 2 percent during the year the money was deposited,then Bob's purchasing power has increased by 3 percent.

Correct AnswerverifiedShow Answer

Henry Ford paid his workers $5 a day in 1914,when the CPI was 10.Today,with the price index at 177,the $5 a day is worth $88.50.

Correct AnswerverifiedShow Answer

Suppose the price of gasoline increases rapidly and consumers respond by buying a smaller quantity of gasoline.The consumer price index

Correct AnswerverifiedShow Answer

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

Correct AnswerverifiedShow Answer

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year.In 2002,the basket's cost was $50;in 2004,the basket's cost was $52;and in 2006,the basket's cost was $54.60.The value of the CPI in 2004 was

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

The CPI is calculated

Correct AnswerverifiedShow Answer

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Correct AnswerverifiedShow Answer

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006.The consumer price index was 177 in 2001 and 266 in 2006.Dewey's 2006 salary in 2001 dollars is

Correct AnswerverifiedShow Answer

If the price index was 90 in year 1,100 in year 2,and 95 in year 3,then the economy experienced

Correct AnswerverifiedShow Answer

Suppose the price index was 105 in 2007,115.5 in 2008,and the inflation rate was lower between 2008 and 2009 than it was between 2007 and 2008.This means that

Correct AnswerverifiedShow Answer

In 1931,President Herbert Hoover was paid a salary of $75,000.Government statistics show a consumer price index of 15.2 for 1931 and 207 for 2007.President Hoover's 1931 salary was equivalent to a 2007 salary of about

Correct AnswerverifiedShow Answer

Table 24-4 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 24-4.If the base year is 2004,then the inflation rate in 2006 was

Correct AnswerverifiedShow Answer

Ralph puts money in the bank and earns a 5 percent nominal interest rate.If the inflation rate is 2 percent,then after one year,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified