Question 1

The idea of purchasing power parity:

Accepted Answer

A)  always holds.
B)  rarely holds.
C)  explains why standards of living have changed over time.
D)  explains how standards of living have changed over time.E) A) and D)
F) B) and C)

Question 2

Which of the following reasons can explain why purchasing power parity doesn't hold?

Accepted Answer

A)  Transactions costs
B)  Political pressures
C)  Fixed prices
D)  All of these are reasons why purchasing power parity doesn't hold.E) None of the above
F) A) and B)

Question 3

Core inflation is measured because:

Accepted Answer

A)  food and energy costs fluctuate frequently and can distort actual changes in the cost of living.
B)  the prices of retail consumption items fluctuate frequently and can distort actual changes in the cost of living.
C)  the prices of nondurable goods fluctuate more frequently than the prices of durable goods;therefore,removing them from the basket prevents potential distortion.
D)  the prices of durable goods fluctuate more frequently than the prices of nondurable goods;therefore,removing them from the basket prevents potential distortion.E) All of the above
F) None of the above

Question 4

Core inflation:

Accepted Answer

A)  measures the changes in prices for the entire market basket of the average urban consumer.
B)  is inflation measured using the producer price index.
C)  measures price changes for the market basket of the average urban consumer with food and energy costs taken out.
D)  is inflation measured using the retail price index.E) A) and B)
F) A) and C)

Question 5

The reason economists create a market basket is:

Accepted Answer

A)  to track its changing prices to reflect changes in the cost of living.
B)  to see how the cost of buying the goods and services on the list changes over time.
C)  to know how typical consumers are being affected by changing prices.
D)  All of these statements are true.E) A) and C)
F) None of the above

Question 6

This table shows the price-level adjustment as compared to the United States. 
According to the information given in the table shown,if someone makes $40,000 in the U.S. ,what would his salary need to be in Mexico to maintain the same standard of living?

Accepted Answer

A)  $60,606
B)  $26,400
C)  $40,000
D)  $13,600E) B) and C)
F) A) and B)

Question 7

Which of the following goods is least likely to be in a market basket?

Accepted Answer

A)  Shuttle service
B)  Airfare
C)  Streetlamps
D)  Coffee beansE) All of the above
F) None of the above

Question 8

COLA stands for:

Accepted Answer

A)  cost-of-living adjustment.
B)  cost-of-living aggregate.
C)  capital operations leasing adjustment.
D)  capital operations leasing agreement.E) C) and D)
F) B) and D)

Question 9

Any basket of goods that is missing food and energy items:

Accepted Answer

A)  is missing a large portion of consumption.
B)  is missing a small portion of a typical consumer's basket.
C)  is a useless calculation.
D)  is called the retail sales index.E) A) and B)
F) None of the above

Question 10

PPP-adjustment involves:

Accepted Answer

A)  recalculating economic statistics to account for differences in price levels across countries.
B)  a method very similar to adjusting to cost-of-living increases using a price index like the CPI.
C)  recalculating a variable like GDP per capita so we can compare someone's standard of living across countries.
D)  All of these statements are true.E) A) and B)
F) A) and C)

Question 11

Inflation:

Accepted Answer

A)  hurts everyone in the economy whenever it occurs.
B)  hurts everyone in the economy the same.
C)  always decreases purchasing power.
D)  has very real costs associated with it.E) A) and B)
F) A) and C)

Question 12

When we say the cost of living has gone up,we mean that,looking broadly over a range of goods and services:

Accepted Answer

A)  a dollar buys less today than it used to buy.
B)  a dollar buys more today than it used to buy.
C)  a dollar buys the same today as it used to buy.
D)  our income has increased to match the cost of those goods.E) B) and D)
F) A) and B)

Question 13

The Big Mac index compares:

Accepted Answer

A)  the cost of a Big Mac all over the world.
B)  the cost of a typical basket for consumers all over the world.
C)  typical food costs,as food is the largest component of all consumption baskets.
D)  typical food and energy costs across different locations.E) A) and C)
F) All of the above

Question 14

Social Security checks began to be issued in:

Accepted Answer

A)  1920.
B)  1930.
C)  1940.
D)  1950.E) A) and B)
F) A) and C)

Question 15

The price index that measures the prices of goods and services purchased by firms is called the:

Accepted Answer

A)  producer price index.
B)  purchasing power index.
C)  consumer price index.
D)  retail sales index.E) A) and B)
F) A) and C)

Question 16

Making international comparisons of purchasing power:

Accepted Answer

A)  is not straightforward.
B)  is complicated by trying to define a "typical" consumer.
C)  is hard especially when attempting to figure out the true purchasing power of the poor.
D)  All of these statements are true.E) A) and D)
F) None of the above

Question 17

Ida May Fuller was the first person to:

Accepted Answer

A)  receive a Social Security check.
B)  have her Social Security check adjusted for inflation.
C)  receive Social Security payments for over 20 years.
D)  petition Congress for indexing Social Security payments.E) A) and B)
F) A) and C)

Question 18

Indexing Social Security payments:

Accepted Answer

A)  no longer requires a concerted effort on the part of Congress to maintain their real value.
B)  still requires a concerted effort on the part of Congress to vote the amount of increase.
C)  no longer requires a concerted effort on the part of Congress to maintain their nominal value.
D)  still requires a concerted effort on the part of Congress to convert them to their nominal amounts.E) A) and B)
F) B) and C)

Question 19

A price index:

Accepted Answer

A)  measures how much the cost of a market basket has risen or fallen relative to the cost in a base time period or location.
B)  summarizes the changes in the cost of living.
C)  allows us to see clearly the changes in the cost of a market basket over time or across different locations.
D)  All of these statements are true.E) B) and C)
F) A) and B)

Question 20

Trade restrictions can prevent purchasing power parity from holding because:

Accepted Answer

A)  the time and energy of importation paperwork can add to the cost of the good sold.
B)  tariffs can add to the cost of the good sold.
C)  they can add costs to the selling price because they add to the seller's cost.
D)  All of these statements are true.E) All of the above
F) A) and B)

Exam 25: The Cost of Living

Core inflation:

Correct AnswerverifiedShow Answer

The Big Mac index compares:

Correct AnswerverifiedShow Answer

This table shows the price-level adjustment as compared to the United States. According to the information given in the table shown,if someone makes $40,000 in the U.S. ,what would his salary need to be in Mexico to maintain the same standard of living?

Correct AnswerverifiedShow Answer

Any basket of goods that is missing food and energy items:

Correct AnswerverifiedShow Answer

Ida May Fuller was the first person to:

Correct AnswerverifiedShow Answer

A price index:

Correct AnswerverifiedShow Answer

Which of the following reasons can explain why purchasing power parity doesn't hold?

Correct AnswerverifiedShow Answer

When we say the cost of living has gone up,we mean that,looking broadly over a range of goods and services:

Correct AnswerverifiedShow Answer

The price index that measures the prices of goods and services purchased by firms is called the:

Correct AnswerverifiedShow Answer

The idea of purchasing power parity:

Correct AnswerverifiedShow Answer

Inflation:

Correct AnswerverifiedShow Answer

Which of the following goods is least likely to be in a market basket?

Correct AnswerverifiedShow Answer

Core inflation is measured because:

Correct AnswerverifiedShow Answer

COLA stands for:

Correct AnswerverifiedShow Answer

PPP-adjustment involves:

Correct AnswerverifiedShow Answer

The reason economists create a market basket is:

Correct AnswerverifiedShow Answer

Trade restrictions can prevent purchasing power parity from holding because:

Correct AnswerverifiedShow Answer

Indexing Social Security payments:

Correct AnswerverifiedShow Answer

Making international comparisons of purchasing power:

Correct AnswerverifiedShow Answer

Social Security checks began to be issued in:

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

Correct Answer
verified

Correct Answer
verified