Question 1

Table 6-11. Megan's salary for three consecutive years, along with other values, are presented in the table below.
 
-Refer to Table 6-11. Megan's 2008 salary in 2010 dollars is

Accepted Answer

A)   $51,458.
B)   $62,226.
C)   $69,960.
D)   $75,554.E) B) and D)
F) A) and D)

Question 2

Iggie took a university teaching job as an assistant professor in 1974 at a salary of $10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If the price index was 50 in 1974 and 180 in 2003, then what is Iggie's 1974 salary in 2003 dollars?

Accepted Answer

A)   $2,777.78
B)   $18,000
C)   $26,000
D)   $36,000E) A) and B)
F) A) and C)

Question 3

If the cost of food & beverages increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Accepted Answer

A)   1.5 percent.
B)   7.5 percent.
C)   10 percent.
D)   20 percent.E) All of the above
F) A) and B)

Question 4

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

A)   substitution bias
B)   introduction of new goods
C)   unmeasured quality change
D)   income biasE) A) and B)
F) B) and C)

Question 5

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 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Accepted Answer

A) True 
 B)False

Question 6

Table 6-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below.
 
-Refer to Table 6-12. Suppose Will's 2009 food expenditures in 2011 dollars amounted to $5,670. Suppose also that the real interest rate in 2011 was 3 percent. Then, in 2011,

Accepted Answer

A)   the inflation rate was 8 percent and the nominal interest rate was 5 percent.
B)   the inflation rate was 9 percent and the nominal interest rate was 6 percent.
C)   the inflation rate was 8 percent and the nominal interest rate was 11 percent.
D)   the inflation rate was 9 percent and the nominal interest rate was 12 percent.E) All of the above
F) B) and D)

Question 7

When the consumer price index falls, the typical family

Accepted Answer

A)   has to spend more dollars to maintain the same standard of living.
B)   can spend fewer dollars to maintain the same standard of living.
C)   finds that its standard of living is not affected.
D)   can save less because they do not need to offset the effects of rising prices.E) B) and D)
F) B) and C)

Question 8

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Accepted Answer

A)   80 in Kansas City and 100 in Dallas
B)   125 in Kansas City and 150 in Dallas
C)   100 in Kansas City and 124.5 in Dallas
D)   100 in Kansas City and 140 in DallasE) A) and B)
F) A) and C)

Question 9

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

Accepted Answer

A)   more cola and more mints.
B)   more cola and fewer mints.
C)   less cola and more mints.
D)   less cola and fewer mints.E) A) and B)
F) None of the above

Question 10

Which is likely to have the larger effect on the CPI, a 2 percent increase in the price of food or a 3 percent increase in the price of diamond rings? Explain.

Accepted Answer

The 2 percent increase in the ...

Question 11

The purpose of measuring the overall level of prices in the economy is to permit comparison between dollar figures from different times.

Accepted Answer

A) True 
 B)False

Question 12

If the nominal interest rate is 5 percent and the rate of inflation is 9 percent, then the real interest rate is

Accepted Answer

A)   -4 percent.
B)   -0.44 percent.
C)   4 percent.
D)   14 percent.E) None of the above
F) A) and B)

Question 13

Economists use the term inflation to describe a situation in which

Accepted Answer

A)   some prices are rising faster than others.
B)   the economy's overall price level is rising.
C)   the economy's overall price level is high, but not necessarily rising.
D)   the economy's overall output of goods and services is rising faster than the economy's overall price level.E) C) and D)
F) A) and C)

Question 14

A COLA automatically raises the wage when the CPI rises.

Accepted Answer

A) True 
 B)False

Question 15

The largest sector in the consumer price index market basket is food and beverage purchases.

Accepted Answer

A) True 
 B)False

Question 16

The problems with using the consumer price index as a measure of the cost of living are important because

Accepted Answer

A)   even the appearance of high rates of inflation cause voters to become disenchanted.
B)   politicians have manipulated the measurement problems to their advantage.
C)   many government programs use the CPI to adjust for changes in the overall level of prices.
D)   if the price level is overstated, consumers will be taken advantage of by sellers of consumer goods.E) None of the above
F) A) and B)

Question 17

Table 6-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below.
 
-Refer to Table 6-12. Suppose Will's 2010 food expenditures in 2011 dollars amount to $6,235. Then x, the consumer price index for 2011, has a value of

Accepted Answer

A)   171.2.
B)   175.0.
C)   177.5.
D)   180.6.E) A) and C)
F) B) and D)

Question 18

Table 6-11. Megan's salary for three consecutive years, along with other values, are presented in the table below.
 
-Refer to Table 6-11. Suppose the consumer price index for 2010 is not necessarily 233.2. If the nominal interest rate for 2010 is 7.3 percent , then the consumer price index for 2010 is, in fact,

Accepted Answer

A)   210.00.
B)   216.06.
C)   220.48.
D)   226.26.E) B) and C)
F) A) and D)

Question 19

The price index was 150 in the first year, 160 in the second year, and 175 in the third year. The inflation rate was about

Accepted Answer

A)   6.25 percent between the first and second years, and 8.6 percent between the second and third years.
B)   6.7 percent between the first and second years, and 9.4 percent between the second and third years.
C)   10 percent between the first and second years, and 15 percent between the second and third years.
D)   60 percent between the first and second years, and 75 percent between the second and third years.E) B) and C)
F) A) and D)

Question 20

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) C) and D)
F) None of the above

Exam 6: Measuring the Cost of Living

If the cost of food & beverages increases by 10 percent, then, other things the same, the CPI is likely to increase by about

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 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Correct Answer
verified

The purpose of measuring the overall level of prices in the economy is to permit comparison between dollar figures from different times.

Correct Answer
verified

Economists use the term inflation to describe a situation in which

Correct Answer
verified

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Correct Answer
verified

The problems with using the consumer price index as a measure of the cost of living are important because

Correct Answer
verified

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

Correct Answer
verified

A COLA automatically raises the wage when the CPI rises.

Correct Answer
verified

Table 6-11. Megan's salary for three consecutive years, along with other values, are presented in the table below. -Refer to Table 6-11. Megan's 2008 salary in 2010 dollars is

Correct Answer
verified

The price index was 150 in the first year, 160 in the second year, and 175 in the third year. The inflation rate was about

Correct Answer
verified

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Correct Answer
verified

Table 6-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 6-12. Suppose Will's 2010 food expenditures in 2011 dollars amount to $6,235. Then x, the consumer price index for 2011, has a value of

Correct Answer
verified

If the nominal interest rate is 5 percent and the rate of inflation is 9 percent, then the real interest rate is

Correct Answer
verified

Correct Answer
verified

The largest sector in the consumer price index market basket is food and beverage purchases.

Correct Answer
verified

Correct Answer
verified

Iggie took a university teaching job as an assistant professor in 1974 at a salary of $10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If the price index was 50 in 1974 and 180 in 2003, then what is Iggie's 1974 salary in 2003 dollars?

Correct Answer
verified

When the consumer price index falls, the typical family

Correct Answer
verified

The CPI is a measure of the overall cost of

Correct Answer
verified

Which is likely to have the larger effect on the CPI, a 2 percent increase in the price of food or a 3 percent increase in the price of diamond rings? Explain.

Correct Answer
verified
The 2 percent increase in the ...
View Answer

Exam 6: Measuring the Cost of Living

If the cost of food & beverages increases by 10 percent, then, other things the same, the CPI is likely to increase by about

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 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Correct AnswerverifiedShow Answer

The purpose of measuring the overall level of prices in the economy is to permit comparison between dollar figures from different times.

Correct AnswerverifiedShow Answer

Economists use the term inflation to describe a situation in which

Correct AnswerverifiedShow Answer

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Correct AnswerverifiedShow Answer

The problems with using the consumer price index as a measure of the cost of living are important because

Correct AnswerverifiedShow Answer

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

Correct AnswerverifiedShow Answer

A COLA automatically raises the wage when the CPI rises.

Correct AnswerverifiedShow Answer

Table 6-11. Megan's salary for three consecutive years, along with other values, are presented in the table below. -Refer to Table 6-11. Megan's 2008 salary in 2010 dollars is

Correct AnswerverifiedShow Answer

The price index was 150 in the first year, 160 in the second year, and 175 in the third year. The inflation rate was about

Correct AnswerverifiedShow Answer

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Correct AnswerverifiedShow Answer

Table 6-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 6-12. Suppose Will's 2010 food expenditures in 2011 dollars amount to $6,235. Then x, the consumer price index for 2011, has a value of

Correct AnswerverifiedShow Answer

If the nominal interest rate is 5 percent and the rate of inflation is 9 percent, then the real interest rate is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The largest sector in the consumer price index market basket is food and beverage purchases.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Iggie took a university teaching job as an assistant professor in 1974 at a salary of $10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If the price index was 50 in 1974 and 180 in 2003, then what is Iggie's 1974 salary in 2003 dollars?

Correct AnswerverifiedShow Answer

When the consumer price index falls, the typical family

Correct AnswerverifiedShow Answer

The CPI is a measure of the overall cost of

Correct AnswerverifiedShow Answer

Which is likely to have the larger effect on the CPI, a 2 percent increase in the price of food or a 3 percent increase in the price of diamond rings? Explain.

Correct AnswerverifiedThe 2 percent increase in the ...View AnswerShow Answer

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The 2 percent increase in the ...
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