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Exam 11: Measuring the Cost of Living

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Question 141

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The inflation rate is calculated

A) by determining the change in the price index from the preceding period.
B) by determining the change in the price index from the base year.
C) by determining the percentage change in the price index from the preceding period.
D) by determining the percentage change in the price index from the base year.

E) A) and B)
F) A) and C)

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Question 142

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Suppose you know the value of the consumer price index (CPI) in year 1 as well as the inflation rate in year 2. Which of the following equations is valid for the CPI in year 2?

A)
$\text { CPI in year } 2 = \frac { 100 \times \text { CPI in year } 1 } { \text { Inflation rate in year } 1 \times 100 }$

B)
$\text { CPI in year } 2 = \frac { \text { CPI in year } 2 \div 100 } { \text { Inflation rate in year } 2 + 100 }$

C)
$\text { CPI in year } 2 = \frac { ( \text { Inflation rate in year } 2 \div \text { CPI in year } 1 ) + \text { CPI in year } 1 } { 100 }$

D)
$\text { CPI in year } 2 = \frac { ( \text { CPI in year } 1 \times \text { Inflation rate in year } 2 ) + ( 100 \times \text { CPI in year } 1 ) } { 100 }$

E) B) and C)
F) A) and B)

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Question 143

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Table 11-4 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. $\begin{array} { | c | c | c } \text { Year } & \begin{array} { c } \text { Price of } \\\text { Meat }\end{array} & \begin{array} { c } \text { Price of a } \\\text { Tryy }\end{array} \\\hline 2004 & \$ 3 \text { per pound } & \$ 2 \\\hline 2005 & \$ 1 \text { per pound } & \$ 7 \\\hline 2006 & \$ 4 \text { per pound } & \$ 5 \\\hline\end{array}$ -Refer to Table 11-4. If the base year is 2006, then the inflation rate in 2005 was

When box office receipts are not corrected for inflation,

Table 11-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 11-12. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670. Then

Table 11-2 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn. $\begin{array} { | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Price of } \\\text { pork }\end{array} & \begin{array} { c } \text { Price of } \\\text { Corn }\end{array} \\\hline 2008 & \$ 20 \text { per pound } & \$ 12 \text { per bushed } \\\hline 2009 & \$ 25 \text { per pound } & \$ 18 \text { per bushed } \\\hline\end{array}$ -Refer to Table 11-2. If 2009 is the base year, then the inflation rate in 2009 was

When the relative price of a good decreases, consumers respond by buying

To calculate the CPI, the Bureau of Labor Statistics uses

Scenario 11-4 Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90. -Refer to Scenario 11-4. If Quinn only cares about maximizing her purchasing power, then she should

Table 11-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. $\begin{array} { l c c } \hline \text { Year } & \text { Priee of hamburegers } & \text { Prife of hat doges } \\\hline 2009 & \$ 5.00 & \$ 3.00 \\2010 & 5.50 & 3.30 \\2011 & 5.61 & 3.63 \\\hline\end{array}$ -Refer to Table 11-6. Which of the following scenarios is consistent with this statement? "The rate of inflation was 23.75 percent for 2011."

If the CPI today is 120 and the CPI five years ago was 80, then something that cost $1 five years ago would cost $1.50 in today's prices.

Data from the Bureau of Labor Statistics show that consumer spending on transportation is only slightly higher than consumer spending on food and beverages.

Table 11-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. $\begin{array} { l c c } \hline \text { Year } & \text { Priee of hamburegers } & \text { Prife of hat doges } \\\hline 2009 & \$ 5.00 & \$ 3.00 \\2010 & 5.50 & 3.30 \\2011 & 5.61 & 3.63 \\\hline\end{array}$ -Refer to Table 11-6. If the base year is 2009, then the economy's inflation rate in 2010 is

Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index was 160 in 1996 and 266 in 2006. Janelle's 2006 salary in 1996 dollars is

If the consumer price index is 120 in 2009 and 139.2 in 2010, then the rate of inflation for 2010 is 39.2 percent.

Economists use the term inflation to describe a situation in which

If 2004 is the base year, then the inflation rate for 2005 equals

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.

If the CPI was 125 this year and 120 last year, then

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the smallest?