Question 1

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) None of the above

Question 2

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy

Accepted Answer

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

Question 3

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

Accepted Answer

A)  $25.00 purchased in 1975.
B)  $33.33 purchased in 1975.
C)  $40.00 purchased in 1975.
D)  $135.55 purchased in 1975.E) B) and D)
F) None of the above

Question 4

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

A)  substitution bias
B)  introduction of new goods
C)  unmeasured quality change
D)  income biasE) A) and B)
F) A) and C)

Question 5

A COLA automatically raises the wage when

Accepted Answer

A)  GDP increases.
B)  taxes increase.
C)  the consumer price index increases.
D)  the producer price index increases.E) A) and C)
F) A) and B)

Question 6

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. Between 2009 and 2011, the cost of living increased by

Accepted Answer

A)  6 percent.
B)  19 percent.
C)  14 percent.
D)  17 percent.E) A) and D)
F) None of the above

Question 7

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

Accepted Answer

A)  1970 and lowest in 1980.
B)  1970 and lowest in 1990.
C)  1980 and lowest in 1970.
D)  1980 and lowest in 1990.E) All of the above
F) B) and C)

Question 8

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) A) and D)
F) A) and C)

Question 9

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was

Accepted Answer

A)  112.5 and the inflation rate was 12.5%.
B)  112.5 and the inflation rate was 4.6%.
C)  104.6 and the inflation rate was 4.6%.
D)  104.6 and the inflation rate was 12.5%.E) C) and D)
F) None of the above

Question 10

Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112, 112 to 118, or 118 to 124?

Accepted Answer

A)  106 to 112
B)  112 to 120
C)  118 to 126
D)  All of these changes produce the same rate of inflation.E) All of the above
F) C) and D)

Question 11

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 12

Scenario 24-6
TOPICS:
Price levels
Inflation
KEYWORDS:
BLOOM'S: Application
CUSTOM ID:
016.24 - SAE - MANK08
Table 24-14
The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period. 
-Refer to Table 24-14. Calculate the inflation rate for March.

Accepted Answer

The answer of Scenario 24-6
TOPICS:
Price levels
Inflation
KEYWORDS:
BLOOM'S: Application
CUSTOM ID:
016.24 - SAE...

Question 13

The inflation rate you are likely to hear on the nightly news is calculated from

Accepted Answer

A)  the GDP deflator.
B)  the CPI.
C)  the Dow Jones Industrial Average.
D)  the unemployment rate.E) B) and C)
F) A) and D)

Question 14

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) B) and C)
F) B) and D)

Question 15

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 D)
F) None of the above

Question 16

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Accepted Answer

A) True 
 B)False

Question 17

Reports on the current consumer price index are released every

Accepted Answer

A)  quarter.
B)  two weeks.
C)  month.
D)  week.E) C) and D)
F) None of the above

Question 18

The CPI differs from the GDP deflator in that

Accepted Answer

A)  the CPI is a price index, while the GDP deflator is an inflation index.
B)  substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.
C)  increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator.
D)  increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator.E) B) and D)
F) None of the above

Question 19

The nominal interest rate tells you

Accepted Answer

A)  how fast the number of dollars in your bank account rises over time.
B)  how fast the purchasing power of your bank account rises over time.
C)  the number of dollars in your bank account today.
D)  the purchasing power of your bank account today.E) C) and D)
F) All of the above

Question 20

Consternation Corporation has an agreement with its workers to index completely the wage of its employees using the CPI. Consternation Corporation currently pays its production line workers $7.50 an hour and is scheduled to index their wages today. If the CPI is currently 130 and was 125 a year ago, the firm should increase the hourly wages of its workers by

Accepted Answer

A)  $0.04.
B)  $0.29.
C)  $0.30.
D)  $0.50.E) C) and D)
F) All of the above

Exam 24: Measuring the Cost of Living

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

Correct Answer
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Correct Answer
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For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Correct Answer
verified

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. Between 2009 and 2011, the cost of living increased by

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

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was

Correct Answer
verified

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Correct Answer
verified

Reports on the current consumer price index are released every

Correct Answer
verified

The nominal interest rate tells you

Correct Answer
verified

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

Correct Answer
verified

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy

Correct Answer
verified

A COLA automatically raises the wage when

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

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

The CPI differs from the GDP deflator in that

Correct Answer
verified

Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112, 112 to 118, or 118 to 124?

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 inflation rate you are likely to hear on the nightly news is calculated from

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Exam 24: Measuring the Cost of Living

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

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. Between 2009 and 2011, the cost of living increased by

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

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was

Correct AnswerverifiedShow Answer

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Correct AnswerverifiedShow Answer

Reports on the current consumer price index are released every

Correct AnswerverifiedShow Answer

The nominal interest rate tells you

Correct AnswerverifiedShow Answer

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

Correct AnswerverifiedShow Answer

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy

Correct AnswerverifiedShow Answer

A COLA automatically raises the wage when

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

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

The CPI differs from the GDP deflator in that

Correct AnswerverifiedShow Answer

Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112, 112 to 118, or 118 to 124?

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 inflation rate you are likely to hear on the nightly news is calculated from

Correct AnswerverifiedShow Answer

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

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