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Exam 11: Measuring the Cost of Living

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Question 171

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The price index was 150 in the first year, 160 in the second year, and 165 in the third year. Which of the following statements is correct?

A) The price level was higher in the second year than in the first year, and it was higher in the third year than in the second year.
B) The inflation rate was positive between the first and second years, and it was positive between the second and third years.
C) The inflation rate was lower between the second and third years than it was between the first and second years.
D) All of the above are correct.

E) A) and B)
F) A) and C)

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Question 172

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In 1972, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost $6.00, then which pair of CPIs would make the cost in today's dollars the same for both years?

A) 60 in 1972 and 150 today
B) 65 in 1972 and 156 today
C) 75 in 1972 and 160 today
D) 90 in 1972 and 145.8 today

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

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Question 173

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Table 24-10 The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats. -Refer to Table 24-10. If 2009 is the base year, then the consumer price index was

The CPI and GDP deflator usually tell two different stories about how quickly prices are rising.

Assume most athletic apparel bought by U.S. consumers is imported from other nations. If all else is constant, an increase in the price of foreign-made athletic apparel will cause the U.S.

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 $5,750. Then the inflation rate for 2011 is about

Price changes from year to year are not proportional, and consumers respond to these changes by altering their spending patterns. The problem this creates for inflation calculations is called

Write the formula for computing the cost of a basket of goods in a given period assuming you only have two goods, X and Y, which are bought in quantities Qx and Qy, and sold at prices of Px and Py.

Data from the Bureau of Labor Statistics show that consumer spending on medical care is about equal to consumer spending on recreation and consumer spending on education and communication.

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

Social Security payments are indexed for inflation using

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

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 in 2012 was

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $58. The value of the CPI in 2016 was

Which of the following is the most accurate statement?

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 $8.00 an hour and is scheduled to index their wages today. If the CPI is currently 160 and was 128 a year ago, the firm should increase the hourly wages of its workers by

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

Suppose Stan Musial earned $115,000 in 1947. If the CPI was 82 in 1947, and was 246 in 1990, what is Stan Musial's 1947 salary in 1990 dollars?

Which of the following agencies calculates the CPI?

Jay and Joyce meet George, the banker, to work out the details of a mortgage. They all expect that inflation will be 2 percent over the term of the loan, and they agree on a nominal interest rate of 6 percent. As it turns out, the inflation rate is 5 percent over the term of the loan. a. What was the expected real interest rate? b. What was the actual real interest rate? c. Who benefited and who lost because of the unexpected inflation?