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Exam 11: Measuring the Cost of Living

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Question 221

True/False

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The producer price index measures the cost of a basket of goods and services bought by firms rather than consumers.

A) True
B) False

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Question 222

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Suppose that U.S. mining companies purchase German-made ore trucks at a reduced price. By itself, what effect will this purchase have on the GDP deflator and on the consumer price index?

A) The consumer price index and the GDP deflator will both fall.
B) The consumer price index and the GDP deflator will both be unaffected.
C) The consumer price index will fall, and the GDP deflator will be unaffected.
D) The consumer price index will be unaffected, and the GDP deflator will fall.

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

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Question 223

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If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

The inflation rate is calculated

During a certain year, the nominal interest rate was 8 percent, the real interest rate was 3 percent, and the CPI was 176.7 at the beginning of the year. The CPI at the end of the year was

To which of the problems in the construction of the CPI is the creation of the mobile phone most relevant?

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

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is

Table 24-9 The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. -Refer to Table 24-9. What is the inflation rate for May?

The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent and the real interest rate is 4.5 percent. If the consumer price index was 200 in 2007, what would the consumer price index value be in 2008?

Table 24-13. Olivia's expenditures on clothing for three consecutive years, along with some values for the CPI, are presented in the table below. -Refer to Table 24-13. Suppose Olivia's 2009 clothing expenditure in 2010 dollars amounts to $1,440. Then X, the consumer price index for 2009, has a value of

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. The cost of the basket in 2013 was

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 consumer price index is

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 the consumer price index is 15.5 percent higher in 2011 than in 2009. Then Will's food expenditures for 2010 in 2011 dollars amount to

Suppose the nominal interest rate this year is 6.5% and that the economy experiences 2.3% deflation. What is the real interest rate?

Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that

If the nominal interest rate is 4.2 percent and the rate of inflation is -0.5 percent, then the real interest rate is

It is possible to observe a positive nominal interest rate together with a negative real interest rate.

If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?

The CPI does not reflect the increase in the value of the dollar that arises from the introduction of new goods.