Question 1

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?

Accepted Answer

A)   food & beverages
B)   recreation
C)   housing
D)   apparelE) A) and B)
F) All of the above

Question 2

The introduction of a new good

Accepted Answer

A)   increases the cost of maintaining the same level of economic well-being.
B)   decreases the cost of maintaining the same level of economic well-being.
C)   has no impact on the cost of maintaining the same level of economic well-being.
D)   may increase or decrease the cost of maintaining the same level of economic well-being,depending on how expensive the new good is.E) C) and D)
F) A) and C)

Question 3

Table 16-3
The table below pertains to Studious,an economy in which the typical consumer's basket consists of 5 books and 10 calculators.
 
-Refer to Table 16-3.If 2006 is the base year,then the consumer price index was

Accepted Answer

A)   100 in 2006,135 in 2007,and 155 in 2008.
B)   100 in 2006,270 in 2007,and 310 in 2008.
C)   200 in 2006,135 in 2007,and 155 in 2008.
D)   200 in 2006,270 in 2007,and 310 in 2008.E) A) and B)
F) A) and D)

Question 4

Table 16-6.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.
 
-Refer to Table 16-6.Which of the following scenarios is consistent with this statement? "The cost of living increased by 25 percent between 2009 and 2011."

Accepted Answer

A)   The price of a hot dog was $2.24 rather than $3.00 in 2009,with other prices in the table remaining fixed.
B)   The price of a hot dog was $4.07 rather than $3.63 in 2011,with other prices in the table remaining fixed..
C)   The price of a hamburger was $4.24 rather than $5.00 in 2009,with other prices in the table remaining fixed.
D)   The price of a hamburger was $5.96 rather than $5.61 in 2011,with other prices in the table remaining fixed.E) B) and C)
F) A) and D)

Question 5

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

Question 6

The relative importance of housing in the breakdown of consumer spending is

Accepted Answer

A)   43 percent.
B)   15 percent.
C)   6 percent.
D)   4 percent.E) B) and C)
F) A) and B)

Question 7

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent,then the real interest rate is

Accepted Answer

A)   -16 percent.
B)   -4 percent.
C)   4 percent.
D)   16 percent.E) B) and C)
F) All of the above

Question 8

You know that a candy bar costs sixty cents today.You also know the CPI for 1962 and the CPI for today.Which of the following would you use to compute the price of the candy bar in 1962 prices?

Accepted Answer

A)   sixty cents(today's CPI - 1962 CPI) 
B)   sixty cents(1962 CPI - today's CPI) 
C)   sixty cents(today's CPI / 1962 CPI) 
D)   sixty cents(1962 CPI / today's CPI) E) All of the above
F) A) and D)

Question 9

Table 16-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below.
 
-Refer to Table 16-12.Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670.Then

Accepted Answer

A)   the consumer price index was 11.8 percent higher in 2011 than it was in 2009.
B)   the inflation rate in 2011 was 8 percent.
C)   Will's 2011 food expenditures in 2009 dollars amount to $5,740.
D)   Will's 2010 food expenditures in 2011 dollars amount to $6,210.E) None of the above
F) All of the above

Question 10

If the value of the consumer price index is 110 in 2005 and 121 in 2006,then the inflation rate is 11 percent for 2006.

Accepted Answer

A) True 
 B)False

Question 11

When the overall level of prices in the economy is increasing,economists say that the economy is experiencing

Accepted Answer

A)   economic growth.
B)   stagflation.
C)   inflation.
D)   deflation.E) A) and B)
F) B) and C)

Question 12

Table 16-4
The table below pertains to Wrexington,an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys.
 
-Refer to Table 16-4.If the base year is 2004,then the inflation rate in 2006 was

Accepted Answer

A)   44.4%.
B)   50%.
C)   62.5%.
D)   80%.E) B) and C)
F) A) and C)

Question 13

Table 16-5
The table below pertains to Napandsnack,an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.
 
-Refer to Table 16-5.If the base year is 2009,then the economy's inflation rate in 2010 is

Accepted Answer

A)   20 percent.
B)   25 percent.
C)   30 percent.
D)   120 percent.E) A) and C)
F) All of the above

Question 14

Suppose today's CPI is 134.85,and suppose one must spend $580 today to purchase the same basket of goods and services that could be bought for $400 in 1989.Then the CPI in 1989 was

Accepted Answer

A)   24.27.
B)   60.68.
C)   93.00.
D)   195.53.E) All of the above
F) A) and D)

Question 15

In 1979 and 1980,

Accepted Answer

A)   the U.S.inflation rate as measured by the GDP deflator was higher than that measured by the CPI,and the difference was explained by rapidly rising prices of goods exported by the U.S.
B)   the U.S.inflation rate as measured by the CPI was higher than that measured by the GDP deflator,and the difference was explained by rapidly rising prices of goods exported by the U.S.
C)   the U.S.inflation rate as measured by the GDP deflator was higher than that measured by the CPI,and the difference was explained by rapidly rising oil prices.
D)   the U.S.inflation rate as measured by the CPI was higher than that measured by the GDP deflator,and the difference was explained by rapidly rising oil prices.E) C) and D)
F) All of the above

Question 16

Arlo is offered a job in Des Moines,where the CPI is 60,and a job in New York,where the CPI is 125.Arlo's job offer in Des Moines is for $48,000.How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Accepted Answer

A)   $23,040
B)   $52,000
C)   $79,200
D)   $100,000E) A) and B)
F) All of the above

Question 17

The CPI was 120 in 2008 and 126 in 2009.Phil borrowed money in 2008 and repaid the loan in 2009.If the nominal interest rate on the loan was 8 percent,then the real interest rate was

Accepted Answer

A)   -2 percent.
B)   3 percent.
C)   5 percent.
D)   13 percent.E) A) and B)
F) A) and C)

Question 18

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2006 salary in 2001 dollars is

Accepted Answer

A)   $20,000; thus,Ruben's purchasing power increased between 2001 and 2006.
B)   $20,000; thus,Ruben's purchasing power decreased between 2001 and 2006.
C)   $64,000; thus,Ruben's purchasing power increased between 2001 and 2006.
D)   $64,000; thus,Ruben's purchasing power decreased between 2001 and 2006.E) B) and C)
F) A) and B)

Question 19

If the cost of apparel increases by 50 percent,then,other things the same,the CPI is likely to increase by about

Accepted Answer

A)   0.5 percent.
B)   2.0 percent.
C)   3.0 percent.
D)   11.8 percent.E) A) and B)
F) A) and C)

Question 20

An increase in the price of Irish whiskey imported into the United States will be reflected in

Accepted Answer

A)   both the U.S.GDP deflator and the U.S.CPI.
B)   neither the U.S.GDP deflator nor the U.S.CPI.
C)   the U.S.GDP deflator,but not the U.S.CPI.
D)   the U.S.CPI,but not the U.S.GDP deflator.E) A) and D)
F) A) and C)

Exam 16: Measuring the Cost of Living

The CPI was 120 in 2008 and 126 in 2009.Phil borrowed money in 2008 and repaid the loan in 2009.If the nominal interest rate on the loan was 8 percent,then the real interest rate was

Correct Answer
verified

When the overall level of prices in the economy is increasing,economists say that the economy is experiencing

Correct Answer
verified

Table 16-3 The table below pertains to Studious,an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 16-3.If 2006 is the base year,then the consumer price index was

Correct Answer
verified

You know that a candy bar costs sixty cents today.You also know the CPI for 1962 and the CPI for today.Which of the following would you use to compute the price of the candy bar in 1962 prices?

Correct Answer
verified

Arlo is offered a job in Des Moines,where the CPI is 60,and a job in New York,where the CPI is 125.Arlo's job offer in Des Moines is for $48,000.How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Correct Answer
verified

Suppose today's CPI is 134.85,and suppose one must spend $580 today to purchase the same basket of goods and services that could be bought for $400 in 1989.Then the CPI in 1989 was

Correct Answer
verified

Table 16-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below. -Refer to Table 16-12.Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670.Then

Correct Answer
verified

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent,then the real interest rate is

Correct Answer
verified

The introduction of a new good

Correct Answer
verified

If the value of the consumer price index is 110 in 2005 and 121 in 2006,then the inflation rate is 11 percent for 2006.

Correct Answer
verified

In 1979 and 1980,

Correct Answer
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Table 16-4 The table below pertains to Wrexington,an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 16-4.If the base year is 2004,then the inflation rate in 2006 was

Correct Answer
verified

Table 16-5 The table below pertains to Napandsnack,an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 16-5.If the base year is 2009,then the economy's inflation rate in 2010 is

Correct Answer
verified

The relative importance of housing in the breakdown of consumer spending is

Correct Answer
verified

If the price of domestically produced power tools increases,then

Correct Answer
verified

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?

Correct Answer
verified

If the cost of apparel increases by 50 percent,then,other things the same,the CPI is likely to increase by about

Correct Answer
verified

An increase in the price of Irish whiskey imported into the United States will be reflected in

Correct Answer
verified

Correct Answer
verified

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2006 salary in 2001 dollars is

Correct Answer
verified

Exam 16: Measuring the Cost of Living

The CPI was 120 in 2008 and 126 in 2009.Phil borrowed money in 2008 and repaid the loan in 2009.If the nominal interest rate on the loan was 8 percent,then the real interest rate was

Correct AnswerverifiedShow Answer

When the overall level of prices in the economy is increasing,economists say that the economy is experiencing

Correct AnswerverifiedShow Answer

Table 16-3 The table below pertains to Studious,an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 16-3.If 2006 is the base year,then the consumer price index was

Correct AnswerverifiedShow Answer

You know that a candy bar costs sixty cents today.You also know the CPI for 1962 and the CPI for today.Which of the following would you use to compute the price of the candy bar in 1962 prices?

Correct AnswerverifiedShow Answer

Arlo is offered a job in Des Moines,where the CPI is 60,and a job in New York,where the CPI is 125.Arlo's job offer in Des Moines is for $48,000.How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Correct AnswerverifiedShow Answer

Suppose today's CPI is 134.85,and suppose one must spend $580 today to purchase the same basket of goods and services that could be bought for $400 in 1989.Then the CPI in 1989 was

Correct AnswerverifiedShow Answer

Table 16-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below. -Refer to Table 16-12.Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670.Then

Correct AnswerverifiedShow Answer

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent,then the real interest rate is

Correct AnswerverifiedShow Answer

The introduction of a new good

Correct AnswerverifiedShow Answer

If the value of the consumer price index is 110 in 2005 and 121 in 2006,then the inflation rate is 11 percent for 2006.

Correct AnswerverifiedShow Answer

In 1979 and 1980,

Correct AnswerverifiedShow Answer

Table 16-4 The table below pertains to Wrexington,an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 16-4.If the base year is 2004,then the inflation rate in 2006 was

Correct AnswerverifiedShow Answer

Table 16-5 The table below pertains to Napandsnack,an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 16-5.If the base year is 2009,then the economy's inflation rate in 2010 is

Correct AnswerverifiedShow Answer

The relative importance of housing in the breakdown of consumer spending is

Correct AnswerverifiedShow Answer

If the price of domestically produced power tools increases,then

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

If the cost of apparel increases by 50 percent,then,other things the same,the CPI is likely to increase by about

Correct AnswerverifiedShow Answer

An increase in the price of Irish whiskey imported into the United States will be reflected in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2006 salary in 2001 dollars is

Correct AnswerverifiedShow Answer

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