Question 1

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

Accepted Answer

A)   151.4
B)   81.4
C)   55.1
D)   122.9E) B) and C)
F) C) and D)

Question 2

Janelle earned a salary of $62,000 in 2004 and $80,000 in 2014. The consumer price index was 126 in 2004 and 170 in 2014. Janelle's 2004 salary in 2014 dollars is

Accepted Answer

A)   $45,953.
B)   $89,280.
C)   $107,953.
D)   $83,651.E) None of the above
F) All of the above

Question 3

Table 24-2
The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans.
 
-Refer to Table 24-2. The cost of the basket in 2013 was

Accepted Answer

A)   $200.
B)   $225.
C)   $235.
D)   $237.5.E) B) and C)
F) C) and D)

Question 4

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. 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) A) and B)
F) None of the above

Question 5

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

Question 6

If the CPI was 120 in 1994, was 126 in 1995, and was 134.82 in 1996, what was the inflation rate in 1995 and in 1996?

Accepted Answer

The inflation rate i...

Question 7

What do real interest rates account for that nominal interest rates do not?

Accepted Answer

Unlike nominal interest rates,...

Question 8

If the real interest rate is 10.3% and the nominal interest rate is 12.6%, what is the inflation rate?

Accepted Answer

The inflat...

Question 9

Suppose the price index was 110 in 2004, 120 in 2005, and 125 in 2006. Which of the following statements is correct?

Accepted Answer

A)   The economy experienced inflation between 2004 and 2005 and between 2005 and 2006.
B)   The inflation rate was positive between 2004 and 2005, and it was negative between 2005 and 2006.
C)   The inflation rate was higher between 2005 and 2006 than it was between 2004 and 2005.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 10

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

Accepted Answer

A)   $5,296.
B)   $1,128,421
C)   $1,208,421
D)   $17,152,000E) C) and D)
F) B) and C)

Question 11

Several studies in the 1990s concluded that the consumer price index overstated inflation by about

Accepted Answer

A)   3 percentage points per year, and that number of percentage points likely still applies now.
B)   3 percentage points per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 3 percentage points.
C)   1 percentage point per year, and that number of percentage points likely still applies now.
D)   1 percentage point per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 1 percentage pointE) C) and D)
F) A) and C)

Question 12

Social Security payments are indexed for inflation using

Accepted Answer

A)   the CPI.
B)   the PPI.
C)   the GDP deflator.
D)   real interest rates.E) A) and B)
F) C) and D)

Question 13

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that

Accepted Answer

A)   the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 2 percent.
B)   the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 8 percent.
C)   the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 2 percent.
D)   the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 5 percent.E) A) and B)
F) A) and C)

Question 14

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

Accepted Answer

A)   $4.75 purchased in 1955.
B)   $20.00 purchased in 1955.
C)   $95.00 purchased in 1955.
D)   $500 purchased in 1955.E) All of the above
F) B) and D)

Question 15

A worker received $5 for a daily wage in 1930. What is the value of that wage today if the CPI was 17 in 1930 and is 230 today?

Accepted Answer

A)   37 cents
B)   $4.63
C)   $67.65
D)   $37.86E) A) and B)
F) A) and C)

Question 16

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

Accepted Answer

A)   the cost of the CPI basket of goods and services increased by 4.2 percent this year.
B)   the price level increased by 4.2 percent this year.
C)   the inflation rate for this year was 4.2 percent.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 17

Table 24-7. 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 24-7. If the base year is 2010, then the economy's inflation rate is

Accepted Answer

A)   2 percent in 2010 and 7 percent in 2011.
B)   4.5 percent in 2010 and 5.2 percent in 2011.
C)   9 percent in 2010 and 5.5 percent in 2011.
D)   10 percent in 2010 and 6.36 percent in 2011.E) None of the above
F) B) and C)

Question 18

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

Accepted Answer

A)   The CPI was 100 in 2003, 110 in 2004, and 105 in 2005.
B)   The CPI was 100 in 2003, 120 in 2004, and 135 in 2005.
C)   The CPI was 100 in 2003, 105 in 2004, and 130 in 2005.
D)   The CPI was 100 in 2003, 90 in 2004, and 88 in 2005.E) A) and D)
F) A) and C)

Question 19

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Accepted Answer

A) True 
 B)False

Question 20

A Korean steel company produces steel in the United States, with some of its steel being exported to other nations and some of it being sold within the United States. If the prices of this steel increase, then

Accepted Answer

A)   the GDP deflator and the CPI will both increase.
B)   the GDP deflator will increase and the CPI will be unchanged.
C)   the GDP deflator will be unchanged and the CPI will increase.
D)   the GDP deflator and the CPI will both be unchanged.E) B) and C)
F) A) and D)

Exam 16: Measuring the Cost of Living

What do real interest rates account for that nominal interest rates do not?

Correct AnswerverifiedUnlike nominal interest rates,...View AnswerShow Answer

Social Security payments are indexed for inflation using

Correct AnswerverifiedShow Answer

Janelle earned a salary of $62,000 in 2004 and $80,000 in 2014. The consumer price index was 126 in 2004 and 170 in 2014. Janelle's 2004 salary in 2014 dollars is

Correct AnswerverifiedShow Answer

If the CPI was 120 in 1994, was 126 in 1995, and was 134.82 in 1996, what was the inflation rate in 1995 and in 1996?

Correct AnswerverifiedThe inflation rate i...View AnswerShow 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. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670. Then

Correct AnswerverifiedShow Answer

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

Correct AnswerverifiedShow Answer

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Correct AnswerverifiedShow Answer

If the real interest rate is 10.3% and the nominal interest rate is 12.6%, what is the inflation rate?

Correct AnswerverifiedThe inflat...View AnswerShow Answer

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

Correct AnswerverifiedShow Answer

Several studies in the 1990s concluded that the consumer price index overstated inflation by about

Correct AnswerverifiedShow Answer

Suppose the price index was 110 in 2004, 120 in 2005, and 125 in 2006. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A Korean steel company produces steel in the United States, with some of its steel being exported to other nations and some of it being sold within the United States. If the prices of this steel increase, then

Correct AnswerverifiedShow Answer

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. The cost of the basket in 2013 was

Correct AnswerverifiedShow Answer

Table 24-7. 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 24-7. If the base year is 2010, then the economy's inflation rate is

Correct AnswerverifiedShow Answer

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

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

A worker received $5 for a daily wage in 1930. What is the value of that wage today if the CPI was 17 in 1930 and is 230 today?

Correct AnswerverifiedShow Answer

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that

Correct AnswerverifiedShow Answer

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Unlike nominal interest rates,...
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