Question 1

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

Accepted Answer

A)   GDP deflator rises much more than does the consumer price index.
B)   consumer price index rises much more than does the GDP deflator.
C)   GDP deflator and the consumer price index rise by about the same amount.
D)   consumer price index rises slightly more than does the GDP deflator.E) None of the above
F) All of the above

Question 2

The price of milk increases dramatically, causing a 0.5 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

Accepted Answer

A)   more than 0.5 percent.
B)   less than 0.5 percent.
C)   0.5 percent.
D)   None of the above is correct; this particular price increase will not affect the GDP deflator.E) A) and B)
F) All of the above

Question 3

Elizabeth just received her Ph.D. in economics and has two competing job offers. The first is in Washington, D.C. and pays a salary of $200,000. She has a similar job offer in Austin, TX that pays $90,000. Which pair of CPIs would make the two salaries have the same purchasing power?
A) 70 in Washington, D.C. and 42 in Austin, TX
B) 140 in Washington, D.C. and 70 in Austin, TX
C) 160 in Washington, D.C. and 72 in Austin, TX
D) 210 in Washington, D.C. and 150 in Austin, TX

Accepted Answer

The answer of Elizabeth just received her Ph.D. in economics...

Question 4

Table 24-16
The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year.
 
-Refer to Table 24-16. Calculate the missing value that belongs in space A.

Accepted Answer

The answer of Table 24-16
The table below lists annual consumer...

Question 5

Kristine has a savings account at a bank. If the nominal interest rate she earns exceeds the rate of inflation, then her purchasing power increases over time.

Accepted Answer

A) True 
 B)False

Question 6

As long as prices are rising over time, then

Accepted Answer

A)   the nominal interest rate exceeds the real interest rate.
B)   the real interest rate exceeds the nominal interest rate.
C)   the real interest rate is positive.
D)   the nominal interest rate is a better indicator than the real interest rate of how fast the purchasing power of your bank account is changing over time.E) B) and D)
F) B) and C)

Question 7

Which of the following changes in the price index produces the greatest rate of inflation: 12 to 15, 20 to 24, or 30 to 35?

Accepted Answer

A)   12 to 15
B)   20 to 24
C)   30 to 35
D)   All of these changes produce the same rate of inflation.E) A) and B)
F) All of the above

Question 8

If the price of domestically produced power tools increases, then

Accepted Answer

A)   the consumer price index and the GDP deflator will both increase.
B)   the consumer price index will increase, and the GDP deflator will be unaffected.
C)   the consumer price index will be unaffected, and the GDP deflator will increase.
D)   the consumer price index and the GDP deflator will both be unaffected.E) C) and D)
F) B) and C)

Question 9

Which of the following agencies calculates the CPI?

Accepted Answer

A)   the National Price Board
B)   the Department Of Weight and Measurements
C)   the Bureau of Labor Statistics
D)   the Congressional Budget OfficeE) B) and C)
F) A) and C)

Question 10

The basket of goods in the consumer price index changes

Accepted Answer

A)   occasionally, as does the group of goods used to compute the GDP deflator.
B)   automatically, as does the group of goods used to compute the GDP deflator.
C)   occasionally, whereas the group of goods used to compute the GDP deflator changes automatically.
D)   automatically, whereas the group of goods used to compute the GDP deflator changes occasionally.E) B) and D)
F) B) and C)

Question 11

Suppose the price for one gallon of gasoline rises from $3.50 to $4.00 and the price of one gallon of milk rises from $3.00 to $3.20. If the CPI rises from 120 to 132, then people likely will buy

Accepted Answer

A)   more gasoline and more milk.
B)   more gasoline and fewer milk.
C)   less gasoline and more milk.
D)   less gasoline and fewer milk.E) All of the above
F) B) and D)

Question 12

By not taking into account the possibility of consumer substitution, the CPI

Accepted Answer

A)   understates the cost of living.
B)   overstates the cost of living.
C)   may overstate or understate the cost of living, depending on how quickly prices rise.
D)   may overstate or understate the cost of living, regardless of how quickly prices rise.E) B) and C)
F) C) and D)

Question 13

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) B) and C)

Question 14

The CPI is calculated

Accepted Answer

A)   weekly.
B)   monthly.
C)   quarterly.
D)   yearly.E) B) and C)
F) B) and D)

Question 15

Table 24-11. Megan's salary for three consecutive years, along with other values, are presented in the table below.
 
-Refer to Table 24-11. Suppose the consumer price index for 2013 is not necessarily 235. If the nominal interest rate for 2013 is 7.3 percent , then the consumer price index for 2013 is, in fact,

Accepted Answer

A)   239.1.
B)   235.5.
C)   242.7.
D)   250.9.E) C) and D)
F) A) and B)

Question 16

Suppose that over the past year, the real interest rate was 3 percent, the CPI was 126.2 at the beginning of the year, and the CPI was 129.5 at the end of the year. It follows that

Accepted Answer

A)   the dollar value of savings increased at 5.6 percent, and the purchasing power of savings increased at 3 percent.
B)   the dollar value of savings increased at 0.4 percent, and the purchasing power of savings increased at 3 percent.
C)   the dollar value of savings increased at 3 percent, and the purchasing power of savings increased at 5.6 percent.
D)   the dollar value of savings increased at 3 percent, and the purchasing power of savings increased at 0.4 percent.E) B) and D)
F) A) and D)

Question 17

If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?

Accepted Answer

A)   45.5%
B)   20.0%
C)   16.7%
D)   9.1%E) B) and C)
F) A) and D)

Question 18

The primary purpose of measuring the overall level of prices in the economy is to

Accepted Answer

A)   allow for the measurement of GDP.
B)   allow consumers to know what kinds of prices to expect in the future.
C)   allow for the comparison of dollar figures from different points in time.
D)   allow for the comparison of dollar figures from the same point in time.E) B) and D)
F) All of the above

Question 19

With respect to the consumer price index, which of the following does not serve as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

Accepted Answer

A)   rises from $0.80 to $1.00 while the price of a loaf of bread rises from $2.00 to $2.50.
B)   rises from $1.00 to $1.30 while the price of a loaf of bread rises from $2.00 to $2.30.
C)   remains constant, while the price of a loaf of bread rises from $2.00 to $2.30.
D)   falls from $1.00 to $0.80 while the price of a loaf of bread falls from $2.00 to $1.80.E) None of the above
F) A) and B)

Question 20

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was 4 percent. It follows that

Accepted Answer

A)   the dollar value of savings increased at 6 percent, and the purchasing power of savings increased at 2 percent.
B)   the dollar value of savings increased at 6 percent, and the purchasing power of savings increased at 10 percent.
C)   the dollar value of savings increased at 10 percent, and the purchasing power of savings increased at 2 percent.
D)   the dollar value of savings increased at 10 percent, and the purchasing power of savings increased at 6 percent.E) All of the above
F) A) and C)

Exam 6: Measuring the Cost of Living

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was 4 percent. It follows that

Correct Answer
verified

The primary purpose of measuring the overall level of prices in the economy is to

Correct Answer
verified

Correct Answer
verified

Kristine has a savings account at a bank. If the nominal interest rate she earns exceeds the rate of inflation, then her purchasing power increases over time.

Correct Answer
verified

The basket of goods in the consumer price index changes

Correct Answer
verified

The price of milk increases dramatically, causing a 0.5 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

Correct Answer
verified

Correct Answer
verified

Suppose that over the past year, the real interest rate was 3 percent, the CPI was 126.2 at the beginning of the year, and the CPI was 129.5 at the end of the year. It follows that

Correct Answer
verified

By not taking into account the possibility of consumer substitution, the CPI

Correct Answer
verified

Which of the following changes in the price index produces the greatest rate of inflation: 12 to 15, 20 to 24, or 30 to 35?

Correct Answer
verified

As long as prices are rising over time, then

Correct Answer
verified

Table 24-16 The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year. -Refer to Table 24-16. Calculate the missing value that belongs in space A.

Correct Answer
verified

If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?

Correct Answer
verified

The CPI is calculated

Correct Answer
verified

With respect to the consumer price index, which of the following does not serve as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

Correct Answer
verified

Suppose the price for one gallon of gasoline rises from $3.50 to $4.00 and the price of one gallon of milk rises from $3.00 to $3.20. If the CPI rises from 120 to 132, then people likely will buy

Correct Answer
verified

If the price of domestically produced power tools increases, then

Correct Answer
verified

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

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

Which of the following agencies calculates the CPI?

Correct Answer
verified

Exam 6: Measuring the Cost of Living

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was 4 percent. It follows that

Correct AnswerverifiedShow Answer

The primary purpose of measuring the overall level of prices in the economy is to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Kristine has a savings account at a bank. If the nominal interest rate she earns exceeds the rate of inflation, then her purchasing power increases over time.

Correct AnswerverifiedShow Answer

The basket of goods in the consumer price index changes

Correct AnswerverifiedShow Answer

The price of milk increases dramatically, causing a 0.5 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that over the past year, the real interest rate was 3 percent, the CPI was 126.2 at the beginning of the year, and the CPI was 129.5 at the end of the year. It follows that

Correct AnswerverifiedShow Answer

By not taking into account the possibility of consumer substitution, the CPI

Correct AnswerverifiedShow Answer

Which of the following changes in the price index produces the greatest rate of inflation: 12 to 15, 20 to 24, or 30 to 35?

Correct AnswerverifiedShow Answer

As long as prices are rising over time, then

Correct AnswerverifiedShow Answer

Table 24-16 The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year. -Refer to Table 24-16. Calculate the missing value that belongs in space A.

Correct AnswerverifiedShow Answer

If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?

Correct AnswerverifiedShow Answer

The CPI is calculated

Correct AnswerverifiedShow Answer

With respect to the consumer price index, which of the following does not serve as an example of how the substitution bias arises? Between 2010 and 2011, the price of a pound of peanuts

Correct AnswerverifiedShow Answer

Suppose the price for one gallon of gasoline rises from $3.50 to $4.00 and the price of one gallon of milk rises from $3.00 to $3.20. If the CPI rises from 120 to 132, then people likely will buy

Correct AnswerverifiedShow Answer

If the price of domestically produced power tools increases, then

Correct AnswerverifiedShow Answer

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

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

Which of the following agencies calculates the CPI?

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