Question 1

Table 11-3
The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators.   Year  Price of a  Buak  Price of a  Calculator 2006$24$82007$30$122008$32$15\begin{array} { | c | c | c | } \hline 	ext { Year } & \begin{array} { c } 	ext { Price of a } \	ext { Buak }\end{array} & \begin{array} { c } 	ext { Price of a } \	ext { Calculator }\end{array} \\hline 2006 & \$ 24 & \$ 8 \\hline 2007 & \$ 30 & \$ 12 \\hline 2008 & \$ 32 & \$ 15 \\hline\end{array} Year 200620072008​ Price of a  Buak ​$24$30$32​ Price of a  Calculator ​$8$12$15​​ 
-Refer to Table 11-3. The cost of the basket

Accepted Answer

A)  increased by $10 from 2006 to 2007.
B)  increased by $42 from 2006 to 2007.
C)  increased by $70 from 2006 to 2007.
D)  increased by $150 from 2006 to 2007. E) None of the above
F) All of the above

Question 2

One of the differences between the GDP deflator and the consumer price index is

Accepted Answer

A)  the GDP deflator includes income earned by American citizens working in foreign countries and the consumer price index is based solely on purchases made in the U.S.
B)  the consumer price index basket of goods is updated constantly by the Bureau of Labor Statistics whereas the GDP deflator is updated only occasionally.
C)  the consumer price index includes items not included in the GDP deflator such as airplanes purchased by the Air Force.
D)  the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers.E) A) and B)
F) B) and C)

Question 3

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.   Year  Priee of hamburegers  Prife of hat doges 2009$5.00$3.0020105.503.3020115.613.63\begin{array} { l c c } \hline 	ext { Year } & 	ext { Priee of hamburegers } & 	ext { Prife of hat doges } \\hline 2009 & \$ 5.00 & \$ 3.00 \2010 & 5.50 & 3.30 \2011 & 5.61 & 3.63 \\hline\end{array} Year 200920102011​ Priee of hamburegers $5.005.505.61​ Prife of hat doges $3.003.303.63​​ 
-Refer to Table 11-6. If the base year is 2010, then the economy's inflation rate in 2010 is

Accepted Answer

A)  8 percent.
B)  10 percent.
C)  10.91 percent.
D)  11.11 percent. E) None of the above
F) A) and D)

Question 4

If the current year CPI is 140, then the price level has increased 40 percent since the base year.

Accepted Answer

A) True 
 B)False

Question 5

Scenario 11-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2008. The price index was 17.6 in 1944 and 184 in 2008.
-Refer to Scenario 11-3. Sue Holloway's 1944 income in 2008 dollars is

Accepted Answer

A)  $1,147.83.
B)  $113,454.55.
C)  $125,454.55.
D)  $1,996,800.00.E) C) and D)
F) A) and B)

Question 6

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

The CPI is always 1 in the base year.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  education & communication
B)  recreation
C)  medical care
D)  All of the above categories are about equal in magnitude.E) A) and C)
F) A) and B)

Question 10

Table 11-3
The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators.   Year  Price of a  Buak  Price of a  Calculator 2006$24$82007$30$122008$32$15\begin{array} { | c | c | c | } \hline 	ext { Year } & \begin{array} { c } 	ext { Price of a } \	ext { Buak }\end{array} & \begin{array} { c } 	ext { Price of a } \	ext { Calculator }\end{array} \\hline 2006 & \$ 24 & \$ 8 \\hline 2007 & \$ 30 & \$ 12 \\hline 2008 & \$ 32 & \$ 15 \\hline\end{array} Year 200620072008​ Price of a  Buak ​$24$30$32​ Price of a  Calculator ​$8$12$15​​ 
-Refer to Table 11-3. If 2008 is the base year, then the consumer price index was

Accepted Answer

A)  64.5 in 2006, 87.1 in 2007, and 100 in 2008.
B)  64.5 in 2006, 270 in 2007, and 310 in 2008.
C)  200 in 2006, 87.1 in 2007, and 100 in 2008.
D)  200 in 2006, 270 in 2007, and 310 in 2008. E) All of the above
F) None of the above

Question 11

The group of goods and services used to compute the GDP deflator changes automatically over time, but the group of goods and services used to compute the CPI does not.

Accepted Answer

A) True 
 B)False

Question 12

From 2008 to 2009, the CPI for medical care increased from 150.8 to 164.4. What was the inflation rate for medical care?

Accepted Answer

A)  4.4 percent
B)  7.6 percent
C)  9.0 percent
D)  12.1 percentE) None of the above
F) All of the above

Question 13

If the current year CPI is 90, then the price level has decreased 10 percent since the base year.

Accepted Answer

A) True 
 B)False

Question 14

The CPI differs from the GDP deflator in that

Accepted Answer

A)  the CPI is an inflation index, while the GDP deflator is a price 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 GDP deflator but not in the CPI.
D)  increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI.E) A) and D)
F) C) and D)

Question 15

Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170?

Accepted Answer

A)  80 to 100
B)  100 to 120
C)  150 to 170
D)  All of these changes produce the same rate of inflation.E) C) and D)
F) None of the above

Question 16

Suppose lawn mowers are part of the market basket used to compute the CPI. Suppose also that the quality of lawn mowers deteriorates while the price of lawn mowers stays the same. If the Bureau of Labor Statistics is able to precisely adjust the CPI for the improvement in quality, then, other things equal,

Accepted Answer

A)  the CPI will rise.
B)  the CPI will fall.
C)  the CPI will stay the same.
D)  lawn mowers will no longer be included in the market basket.E) C) and D)
F) A) and D)

Question 17

Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. 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)  $42,000
B)  $65,625
C)  $68,880
D)  $189,000E) A) and B)
F) A) and C)

Question 18

A COLA automatically raises the wage when the CPI rises.

Accepted Answer

A) True 
 B)False

Question 19

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

Accepted Answer

A)  rises and the cost of living increases.
B)  rises and the cost of living decreases.
C)  falls and the cost of living increases.
D)  falls and the cost of living decreases.E) C) and D)
F) A) and C)

Question 20

Scenario 11-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 11-2. The price of a 1975 golf ball in 2005 dollars is

Accepted Answer

A)  $0.05.
B)  $0.53.
C)  $0.73.
D)  $2.00.E) None of the above
F) B) and D)

Exam 11: Measuring the Cost of Living

Correct Answer
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A COLA automatically raises the wage when the CPI rises.

Correct Answer
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The CPI is always 1 in the base year.

Correct Answer
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One of the differences between the GDP deflator and the consumer price index is

Correct Answer
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Correct Answer
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If the current year CPI is 140, then the price level has increased 40 percent since the base year.

Correct Answer
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The CPI differs from the GDP deflator in that

Correct Answer
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Correct Answer
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Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170?

Correct Answer
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Scenario 11-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 11-2. The price of a 1975 golf ball in 2005 dollars is

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Correct Answer
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Scenario 11-3 Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2008. The price index was 17.6 in 1944 and 184 in 2008. -Refer to Scenario 11-3. Sue Holloway's 1944 income in 2008 dollars is

Correct Answer
verified

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Correct Answer
verified

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

Correct Answer
verified

The group of goods and services used to compute the GDP deflator changes automatically over time, but the group of goods and services used to compute the CPI does not.

Correct Answer
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If the current year CPI is 90, then the price level has decreased 10 percent since the base year.

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

Correct Answer
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From 2008 to 2009, the CPI for medical care increased from 150.8 to 164.4. What was the inflation rate for medical care?

Correct Answer
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Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. 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

Exam 11: Measuring the Cost of Living

Correct AnswerverifiedShow Answer

A COLA automatically raises the wage when the CPI rises.

Correct AnswerverifiedShow Answer

The CPI is always 1 in the base year.

Correct AnswerverifiedShow Answer

One of the differences between the GDP deflator and the consumer price index is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the current year CPI is 140, then the price level has increased 40 percent since the base year.

Correct AnswerverifiedShow Answer

The CPI differs from the GDP deflator in that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170?

Correct AnswerverifiedShow Answer

Scenario 11-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 11-2. The price of a 1975 golf ball in 2005 dollars is

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Which of the following statements is correct?

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Correct AnswerverifiedShow Answer

Scenario 11-3 Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2008. The price index was 17.6 in 1944 and 184 in 2008. -Refer to Scenario 11-3. Sue Holloway's 1944 income in 2008 dollars is

Correct AnswerverifiedShow Answer

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Correct AnswerverifiedShow Answer

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

Correct AnswerverifiedShow Answer

The group of goods and services used to compute the GDP deflator changes automatically over time, but the group of goods and services used to compute the CPI does not.

Correct AnswerverifiedShow Answer

If the current year CPI is 90, then the price level has decreased 10 percent since the base year.

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 largest?

Correct AnswerverifiedShow Answer

From 2008 to 2009, the CPI for medical care increased from 150.8 to 164.4. What was the inflation rate for medical care?

Correct AnswerverifiedShow Answer

Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. 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

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