Question 1

Table 24-4
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 24-4. The cost of the basket

Accepted Answer

A)  increased from 2012 to 2013 and increased from 2013 to 2014.
B)  increased from 2012 to 2013 and decreased from 2013 to 2014.
C)  decreased from 2012 to 2013 and increased from 2013 to 2014.
D)  decreased from 2012 to 2013 and decreased from 2013 to 2014.E) A) and B)
F) C) and D)

Question 2

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Accepted Answer

A) True 
 B)False

Question 3

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Accepted Answer

A)  the percentage change in the price of pretzels is equal to the percentage change in the price of cookies from year to year.
B)  the number of pretzels bought by the typical consumer is equal to the number of cookies bought by the typical consumer in each year.
C)  neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year.
D)  neither the price of pretzels nor the price of cookies changes from year to year.E) A) and B)
F) All of the above

Question 4

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

Question 5

The value of the consumer price index increased from 140 to 147 during 2006. Nathan opened a bank account at the beginning of 2006, and at the end of 2006 his account balance was $12,840. The purchasing power of Nathan's account increased by 2 percent during the year. We can conclude that Nathan opened his account with a deposit of $11,500 at the beginning of 2006.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not correct?

Accepted Answer

A)  The U.S. economy has never experienced deflation.
B)  Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate.
C)  Since 1965, the U.S. economy has experienced rising consumer prices in most years.
D)  During deflation, the real interest rate exceeds the nominal interest rate.E) A) and B)
F) B) and C)

Question 7

Suppose in the year 2000 Ken earned $60,000 per year and that in 2015 he earned $78,000 per year. If the CPI in the year 2000 was 172.2 and in 2015 was 236.7, which of the following statements is correct?

Accepted Answer

A)  ​Ken's standard of living got better from 2000 to 2015.
B)  ​If Ken had earned $81,000 in 2015, his standard of living would have improved relative to his income in 2000.
C)  ​Ken would have needed to earn $87,000 or more in 2015 for his standard of living to have improved relative to his income in 2000.
D)  ​If Ken had earned $83,000 in 2015, his standard of living would have improved relative to his income in 2000.E) B) and D)
F) A) and C)

Question 8

The CPI is a measure of the overall cost of the goods and services bought by

Accepted Answer

A)  a typical firm.
B)  the government.
C)  a typical consumer.
D)  All of the above are correct.E) A) and B)
F) None of the above

Question 9

Explain how the introduction of new goods might bias the calculation of the consumer price index.

Accepted Answer

Because the CPI is based on a fixed bask...

Question 10

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Accepted Answer

A)  The real interest rate is the nominal interest rate times the rate of inflation.
B)  The real interest rate is the nominal interest rate minus the rate of inflation.
C)  The real interest rate is the nominal interest rate plus the rate of inflation.
D)  The real interest rate is the nominal interest rate divided by the rate of inflation.E) A) and B)
F) B) and C)

Question 11

The price index that measures the cost of a basket of goods and services bought by firms is called the

Accepted Answer

A)  industrial price index.
B)  producer price index.
C)  core price index.
D)  GDP deflator.E) All of the above
F) B) and C)

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

Scenario 24-1
The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-1. In 1975 dollars, a 1975 tennis ball cost $0.10 and a 2005 tennis ball cost

Accepted Answer

A)  $0.27, so tennis balls were cheaper in 1975.
B)  $0.27, so tennis balls were cheaper in 2005.
C)  $3.66, so tennis balls were cheaper in 1975.
D)  $3.66, so tennis balls were cheaper in 2005.E) A) and D)
F) None of the above

Question 14

If the real value of an item bought ten years ago is less than it's nominal value at that time, what can one infer about the change in the overall price level during this ten year period?

Accepted Answer

One can infer that t...

Question 15

An important difference between the GDP deflator and the consumer price index is that

Accepted Answer

A)  the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers.
B)  the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers.
C)  the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.
D)  the GDP deflator reflects the prices of all final goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.E) All of the above
F) B) and D)

Question 16

If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent, then the real interest rate is

Accepted Answer

A)  -7.5 percent.
B)  -2.5 percent.
C)  2.5 percent.
D)  7.5 percent.E) A) and B)
F) A) and C)

Question 17

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010. What is the CPI in 2010?

Accepted Answer

The CPI in...

Question 19

Two alternative measures of the overall level of prices are

Accepted Answer

A)  the inflation rate and the consumer price index.
B)  the inflation rate and the GDP deflator.
C)  the GDP deflator and the consumer price index.
D)  the cost of living index and nominal GDP.E) A) and B)
F) None of the above

Question 20

The Bureau of Labor Statistics does not try to account for quality changes in the goods and services in the basket used to compute the CPI.

Accepted Answer

A) True 
 B)False

Exam 24: Measuring the Cost of Living

If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent, then the real interest rate is

Correct Answer
verified

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Correct Answer
verified

The price index that measures the cost of a basket of goods and services bought by firms is called the

Correct Answer
verified

Scenario 24-1 The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-1. In 1975 dollars, a 1975 tennis ball cost $0.10 and a 2005 tennis ball cost

Correct Answer
verified

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Correct Answer
verified

If the real value of an item bought ten years ago is less than it's nominal value at that time, what can one infer about the change in the overall price level during this ten year period?

Correct Answer
verified
One can infer that t...
View Answer

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.

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

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010. What is the CPI in 2010?

Correct Answer
verified
The CPI in...
View Answer

An important difference between the GDP deflator and the consumer price index is that

Correct Answer
verified

Suppose in the year 2000 Ken earned $60,000 per year and that in 2015 he earned $78,000 per year. If the CPI in the year 2000 was 172.2 and in 2015 was 236.7, which of the following statements is correct?

Correct Answer
verified

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

Correct Answer
verified

Table 24-4 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 24-4. The cost of the basket

Correct Answer
verified

The Bureau of Labor Statistics does not try to account for quality changes in the goods and services in the basket used to compute the CPI.

Correct Answer
verified

Two alternative measures of the overall level of prices are

Correct Answer
verified

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Correct Answer
verified

The CPI is a measure of the overall cost of the goods and services bought by

Correct Answer
verified

Correct Answer
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Explain how the introduction of new goods might bias the calculation of the consumer price index.

Correct Answer
verified
Because the CPI is based on a fixed bask...
View Answer

Which of the following is not correct?

Correct Answer
verified

Exam 24: Measuring the Cost of Living

If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent, then the real interest rate is

Correct AnswerverifiedShow Answer

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Correct AnswerverifiedShow Answer

The price index that measures the cost of a basket of goods and services bought by firms is called the

Correct AnswerverifiedShow Answer

Scenario 24-1 The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-1. In 1975 dollars, a 1975 tennis ball cost $0.10 and a 2005 tennis ball cost

Correct AnswerverifiedShow Answer

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Correct AnswerverifiedShow Answer

If the real value of an item bought ten years ago is less than it's nominal value at that time, what can one infer about the change in the overall price level during this ten year period?

Correct AnswerverifiedOne can infer that t...View AnswerShow Answer

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.

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

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010. What is the CPI in 2010?

Correct AnswerverifiedThe CPI in...View AnswerShow Answer

An important difference between the GDP deflator and the consumer price index is that

Correct AnswerverifiedShow Answer

Suppose in the year 2000 Ken earned $60,000 per year and that in 2015 he earned $78,000 per year. If the CPI in the year 2000 was 172.2 and in 2015 was 236.7, which of the following statements is correct?

Correct AnswerverifiedShow Answer

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

Correct AnswerverifiedShow Answer

Table 24-4 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 24-4. The cost of the basket

Correct AnswerverifiedShow Answer

The Bureau of Labor Statistics does not try to account for quality changes in the goods and services in the basket used to compute the CPI.

Correct AnswerverifiedShow Answer

Two alternative measures of the overall level of prices are

Correct AnswerverifiedShow Answer

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Correct AnswerverifiedShow Answer

The CPI is a measure of the overall cost of the goods and services bought by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain how the introduction of new goods might bias the calculation of the consumer price index.

Correct AnswerverifiedBecause the CPI is based on a fixed bask...View AnswerShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

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One can infer that t...
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The CPI in...
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Because the CPI is based on a fixed bask...
View Answer

Correct Answer
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