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Exam 11: Measuring the Cost of Living

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Question 181

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The CPI differs from the GDP deflator in that

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) All of the above

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Question 182

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A decrease in the price of large tractors imported into the United States from Russia

A) leaves the GDP deflator unchanged but decreases the consumer price index.
B) decreases the GDP deflator but leaves the consumer price index unchanged.
C) decreases both the GDP deflator and the consumer price index.
D) leaves both the GDP deflator and the consumer price index unchanged.

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

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Question 183

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Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price of ginger ale has increased 15 percent, so she decides to buy some peppermint tea instead. To which problem in the construction of the CPI is this situation most relevant?

In 1954, Mickey Mantle earned $21,000 playing for the New York Yankees. The CPI in 1954 was 26.9, and the CPI in 2010 was 218.06. What is Mickey Mantle's 1954 salary in 2010 dollars?

Nate collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then his Social Security payments for 1986 should have been

The CPI was 172 in 2007, and the CPI was 46.5 in 1982. If your parents put aside $1,000 for you in 1982, then how much would you have needed in 2007 in order to buy what you could have bought with the $1,000 in 1982?

Table 24-11. Megan's salary for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-11. Megan's 2011 salary in 2013 dollars is

The producer price index measures the cost of a basket of goods and services

The real interest rate tells you

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.

If the cost of medical care increases by 40 percent, then, other things the same, the CPI is likely to increase by about

You know that a candy bar cost five cents in 1962. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in today's prices?

By far the largest category of goods and services in the CPI basket is

The problems with using the consumer price index as a measure of the cost of living are important because

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. If 2012 is the base year, then the consumer price index was

If the nominal interest rate is 7 percent and the real interest rate is -2.5 percent, then the inflation rate is

Suppose the price of a gallon of ice cream rises from $4 to $5 and the price of a can of coffee rises from $2 to $2.50. If the CPI rises from 150 to 177, then people likely will buy

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 2010 food expenditures in 2011 dollars amount to $6,235. Then x, the consumer price index for 2011, has a value of

Suppose that the price of one ear of corn was $0.05 in 1920, that the CPI in 1920 was 10, and that in 1990 the CPI was 180. What is the price of a 1920 ear of corn in 1990 dollars?

If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be