Question 1

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 215 today?

Accepted Answer

A)   40 cents
B)   $5
C)   $63.24
D)   $632.40E) All of the above
F) A) and B)

Question 2

Table 6-5
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 6-5. If the base year is 2009, then the consumer price index was

Accepted Answer

A)   100 in 2009, 115 in 2010, and 116 in 2011.
B)   100 in 2009, 115 in 2010, and 135 in 2011.
C)   100 in 2009, 120 in 2010, and 116 in 2011.
D)   120 in 2009, 125 in 2010, and 135 in 2011.E) A) and B)
F) A) and C)

Question 3

When the quality of a good deteriorates while its price remains the same, the purchasing power of the dollar

Accepted Answer

A)   increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
B)   increases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
C)   decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
D)   decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.E) A) and B)
F) A) and C)

Question 4

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

Question 5

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

Accepted Answer

A)   surveying consumers.
B)   surveying sellers of the goods and services.
C)   working backward from the rate of inflation to arrive at imputed values for those quantities.
D)   arbitrary choices made by federal government employees.E) B) and C)
F) None of the above

Question 6

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) A) and D)
F) B) and D)

Question 7

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Accepted Answer

A)   Economists agree that the bias in the CPI is a very serious problem.
B)   Economists agree that the bias in the CPI is not a serious problem.
C)   Economists agree on the severity of the CPI bias, but there is still debate on what to do about it.
D)   There is still debate among economists on the severity of the CPI bias and what to do about it.E) A) and D)
F) All of the above

Question 8

When the relative price of a good decreases, consumers respond by buying

Accepted Answer

A)   a larger quantity of that good and a larger quantity of substitutes for that good.
B)   a larger quantity of that good and a smaller quantity of substitutes for that good.
C)   a smaller quantity of that good and a larger quantity of substitutes for that good.
D)   a smaller quantity of that good and a smaller quantity of substitutes for that good.E) A) and B)
F) None of the above

Question 9

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Accepted Answer

A) True 
 B)False

Question 10

The inflation rate is the absolute change in the price level from the previous period.

Accepted Answer

A) True 
 B)False

Question 11

There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

Accepted Answer

A) True 
 B)False

Question 12

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.

Accepted Answer

A) True 
 B)False

Question 13

Changes in the consumer price index are useful in predicting changes in the producer price index.

Accepted Answer

A) True 
 B)False

Question 14

Table 6-6. 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 6-6. 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) C) and D)
F) A) and D)

Question 15

Recent changes in methods used to compute the CPI have made the

Accepted Answer

A)   upward bias in the CPI inflation rate more severe than it used to be.
B)   upward bias in the CPI inflation rate less severe than it used to be.
C)   downward bias in the CPI inflation rate more severe than it used to be.
D)   downward bias in the CPI inflation rate less severe than it used to be.E) A) and D)
F) B) and C)

Question 16

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

Accepted Answer

A)   GDP deflator rises much more than does the consumer price index.
B)   consumer price index rises much more than does the GDP deflator.
C)   GDP deflator and the consumer price index rise by about the same amount.
D)   consumer price index rises slightly more than does the GDP deflator.E) B) and C)
F) B) and D)

Question 17

A worker received $5 for a daily wage in 1930, which has the equivalent value of $63.24 today. If the CPI was 17 in 1930 what is the value of the CPI today, rounded to the nearest whole number?

Accepted Answer

A)   215
B)   134
C)   17
D)   1.3E) C) and D)
F) B) and C)

Question 18

Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will

Accepted Answer

A)   increase less than will the consumer price index.
B)   increase more than will the consumer price index.
C)   not increase, but the consumer price index will increase.
D)   increase, but the consumer price index will not increase.E) A) and C)
F) A) and B)

Question 19

The CPI is calculated

Accepted Answer

A)   monthly by the Department of Commerce.
B)   monthly by the Bureau of Labor Statistics.
C)   quarterly by the Department of Commerce.
D)   quarterly by the Bureau of Labor Statistics.E) A) and B)
F) A) and C)

Question 20

Table 6-6. 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 6-6. If the base year is 2009, then the consumer price index is

Accepted Answer

A)   100 in 2009, 109 in 2010, and 115 in 2011.
B)   100 in 2009, 110 in 2010, and 117 in 2011.
C)   110 in 2009, 121 in 2010, and 128.26 in 2011.
D)   44 in 2009, 48.4 in 2010, and 51.48 in 2011.E) A) and B)
F) All of the above

Exam 6: Measuring the Cost of Living

When the quality of a good deteriorates while its price remains the same, the purchasing power of the dollar

Correct Answer
verified

Correct Answer
verified

A worker received $5 for a daily wage in 1930, which has the equivalent value of $63.24 today. If the CPI was 17 in 1930 what is the value of the CPI today, rounded to the nearest whole number?

Correct Answer
verified

Changes in the consumer price index are useful in predicting changes in the producer price index.

Correct Answer
verified

The CPI is calculated

Correct Answer
verified

There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

Correct Answer
verified

The CPI differs from the GDP deflator in that

Correct Answer
verified

Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will

Correct Answer
verified

Table 6-6. 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 6-6. If the base year is 2009, then the consumer price index is

Correct Answer
verified

The inflation rate is the absolute change in the price level from the previous period.

Correct Answer
verified

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.

Correct Answer
verified

Table 6-5 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 6-5. If the base year is 2009, then the consumer price index was

Correct Answer
verified

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

Correct Answer
verified

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Correct Answer
verified

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Correct Answer
verified

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

Correct Answer
verified

Recent changes in methods used to compute the CPI have made the

Correct Answer
verified

When the relative price of a good decreases, consumers respond by buying

Correct Answer
verified

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 215 today?

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

Exam 6: Measuring the Cost of Living

When the quality of a good deteriorates while its price remains the same, the purchasing power of the dollar

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A worker received $5 for a daily wage in 1930, which has the equivalent value of $63.24 today. If the CPI was 17 in 1930 what is the value of the CPI today, rounded to the nearest whole number?

Correct AnswerverifiedShow Answer

Changes in the consumer price index are useful in predicting changes in the producer price index.

Correct AnswerverifiedShow Answer

The CPI is calculated

Correct AnswerverifiedShow Answer

There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

Correct AnswerverifiedShow Answer

The CPI differs from the GDP deflator in that

Correct AnswerverifiedShow Answer

Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will

Correct AnswerverifiedShow Answer

Table 6-6. 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 6-6. If the base year is 2009, then the consumer price index is

Correct AnswerverifiedShow Answer

The inflation rate is the absolute change in the price level from the previous period.

Correct AnswerverifiedShow Answer

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.

Correct AnswerverifiedShow Answer

Table 6-5 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 6-5. If the base year is 2009, then the consumer price index was

Correct AnswerverifiedShow Answer

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

Correct AnswerverifiedShow Answer

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

Correct AnswerverifiedShow Answer

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Correct AnswerverifiedShow Answer

In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by

Correct AnswerverifiedShow Answer

Recent changes in methods used to compute the CPI have made the

Correct AnswerverifiedShow Answer

When the relative price of a good decreases, consumers respond by buying

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 215 today?

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified