Question 1

Which of the following statements is correct?

Accepted Answer

A)   The consumer price index is a measure of the overall level of prices, whereas the GDP deflator is not a measure of the overall level of prices.
B)   If, in the year 2011, the consumer price index has a value of 123.50, then the inflation rate for 2011 must be 23.50 percent.
C)   Compared to the GDP deflator, the consumer price index is the more common gauge of inflation.
D)   The consumer price index and the GDP deflator reflect the goods and services bought by consumers equally well.E) None of the above
F) C) and D)

Question 2

For an imaginary economy, the consumer price index was 115.00 in 2004, 126.50 in 2005, and 136.62 in 2006. Which of the following statements is correct?

Accepted Answer

A)   For this economy, the base year must be 2004.
B)   If the basket of goods that is used to calculate the CPI cost $75.00 in the base year, then that basket of goods cost $115.00 in 2004.
C)   This economy's rate of inflation for 2006 is 10.12 percent.
D)   None of the above is correct.E) C) and D)
F) A) and D)

Question 3

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

Question 4

Changes in the consumer price index are useful in predicting changes in the producer price index.

Accepted Answer

A) True 
 B)False

Question 5

The inflation rate is calculated

Accepted Answer

A)   by determining the change in the price index from the preceding period.
B)   by adding up the price increases of all goods and services.
C)   by computing a simple average of the price increases for all goods and services.
D)   by determining the percentage increase in the price index from the preceding period.E) A) and D)
F) A) and C)

Question 6

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

Accepted Answer

A)   surveying consumers.
B)   surveying sellers of the goods and services.
C)   working backward from the rate of inflation to arrive at imputed values for those quantities.
D)   arbitrary choices made by federal government employees.E) All of the above
F) A) and D)

Question 7

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about

Accepted Answer

A)   $40,000.
B)   $44,100.
C)   $37,838.
D)   $40,091.E) A) and C)
F) None of the above

Question 8

Table 24-1
The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year.
 
-Refer to Table 24-1. What belongs in space E?

Accepted Answer

A)   60%
B)   6%
C)   3.9%
D)   6.7%E) A) and B)
F) A) and C)

Question 9

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below.
 
-Refer to Table 24-12. Will's 2009 food expenditures in 2010 dollars amount to

Accepted Answer

A)   $5,500.
B)   $5,250.
C)   $4,975.
D)   $3,625.E) None of the above
F) B) and C)

Question 10

Persistent increases in the overall level of prices have been the norm.

Accepted Answer

A) True 
 B)False

Question 11

Indexation refers to

Accepted Answer

A)   a process of adjusting the nominal interest rate so that it is equal to the real interest rate.
B)   using a law or contract to automatically correct a dollar amount for the effects of inflation.
C)   using a price index to deflate dollar values.
D)   an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator.E) A) and C)
F) All of the above

Question 12

Recent changes in methods used to compute the CPI have made the

Accepted Answer

A)   upward bias in the CPI inflation rate more severe than it used to be.
B)   upward bias in the CPI inflation rate less severe than it used to be.
C)   downward bias in the CPI inflation rate more severe than it used to be.
D)   downward bias in the CPI inflation rate less severe than it used to be.E) A) and B)
F) A) and C)

Question 13

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

Accepted Answer

A) True 
 B)False

Question 14

The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?

Accepted Answer

A)   - 0.75 percent
B)   - 0.5 percent
C)   9.5 percent
D)   9.75 percentE) B) and C)
F) A) and C)

Question 15

Scenario 24-5
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-5. Using 2009 as the base year, what is the inflation rate in 2010?

Accepted Answer

In 2010 th...

Question 16

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was

Accepted Answer

A)   109.8 and the inflation rate was 9.8%.
B)   109.8 and the inflation rate was 16.9%.
C)   116.9 and the inflation rate was 9.8%.
D)   116.9 and the inflation rate was 16.9%.E) B) and D)
F) A) and D)

Question 17

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

Question 18

Inflation can be measured using either the GDP deflator or the consumer price index.

Accepted Answer

A) True 
 B)False

Question 19

Suppose prices of personal computers fall significantly and consumers respond by buying more personal computers. The consumer price index

Accepted Answer

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

Question 20

What basket of goods and services is used to construct the CPI?

Accepted Answer

A)   a random sample of all goods and services produced in the economy
B)   the goods and services that are typically bought by consumers as determined by government surveys
C)   only food, clothing, transportation, entertainment, and education
D)   the least expensive and the most expensive goods and services in each major category of consumer expendituresE) A) and D)
F) A) and C)

Exam 11: Measuring the Cost of Living

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

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

What basket of goods and services is used to construct the CPI?

Correct Answer
verified

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

Correct Answer
verified

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was

Correct Answer
verified

Suppose prices of personal computers fall significantly and consumers respond by buying more personal computers. The consumer price index

Correct Answer
verified

For an imaginary economy, the consumer price index was 115.00 in 2004, 126.50 in 2005, and 136.62 in 2006. Which of the following statements is correct?

Correct Answer
verified

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Will's 2009 food expenditures in 2010 dollars amount to

Correct Answer
verified

Table 24-1 The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year. -Refer to Table 24-1. What belongs in space E?

Correct Answer
verified

The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?

Correct Answer
verified

Recent changes in methods used to compute the CPI have made the

Correct Answer
verified

The inflation rate is calculated

Correct Answer
verified

Changes in the consumer price index are useful in predicting changes in the producer price index.

Correct Answer
verified

Correct Answer
verified
In 2010 th...
View Answer

Inflation can be measured using either the GDP deflator or the consumer price index.

Correct Answer
verified

Indexation refers to

Correct Answer
verified

Persistent increases in the overall level of prices have been the norm.

Correct Answer
verified

The economy's inflation rate is the

Correct Answer
verified

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about

Correct Answer
verified

Exam 11: Measuring the Cost of Living

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

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

What basket of goods and services is used to construct the CPI?

Correct AnswerverifiedShow Answer

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

Correct AnswerverifiedShow Answer

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was

Correct AnswerverifiedShow Answer

Suppose prices of personal computers fall significantly and consumers respond by buying more personal computers. The consumer price index

Correct AnswerverifiedShow Answer

For an imaginary economy, the consumer price index was 115.00 in 2004, 126.50 in 2005, and 136.62 in 2006. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Will's 2009 food expenditures in 2010 dollars amount to

Correct AnswerverifiedShow Answer

Table 24-1 The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year. -Refer to Table 24-1. What belongs in space E?

Correct AnswerverifiedShow Answer

The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?

Correct AnswerverifiedShow Answer

Recent changes in methods used to compute the CPI have made the

Correct AnswerverifiedShow Answer

The inflation rate is calculated

Correct AnswerverifiedShow Answer

Changes in the consumer price index are useful in predicting changes in the producer price index.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn 2010 th...View AnswerShow Answer

Inflation can be measured using either the GDP deflator or the consumer price index.

Correct AnswerverifiedShow Answer

Indexation refers to

Correct AnswerverifiedShow Answer

Persistent increases in the overall level of prices have been the norm.

Correct AnswerverifiedShow Answer

The economy's inflation rate is the

Correct AnswerverifiedShow Answer

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about

Correct AnswerverifiedShow Answer

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In 2010 th...
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