Question 1

If the real interest rate is 10.3% and the nominal interest rate is 12.6%, what is the inflation rate?

Accepted Answer

The inflat...

Question 2

The primary purpose of measuring the overall level of prices in the economy is to

Accepted Answer

A)   allow for the measurement of GDP.
B)   allow consumers to know what kinds of prices to expect in the future.
C)   allow for the comparison of dollar figures from different points in time.
D)   allow for the comparison of dollar figures from the same point in time.E) C) and D)
F) None of the above

Question 3

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 D)
F) All of the above

Question 4

Suppose a basket of goods and services has been selected to calculate the consumer price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in 2007, it cost $168.75. Which of the following statements is correct?

Accepted Answer

A)   Using 2005 as the base year, the economy's inflation rate was higher in 2007 than it was in 2006.
B)   If 2007 is the base year, then the CPI is 33.75 in 2006.
C)   If the CPI is 156.25 in 2007, then 2005 is the base year.
D)   Using 2005 as the base year, the economy's inflation rate for 2006 was 27 percent.E) B) and C)
F) A) and D)

Question 5

Suppose lawn mowers are part of the market basket used to compute the CPI. Suppose also that the quality of lawn mowers deteriorates while the price of lawn mowers stays the same. If the Bureau of Labor Statistics is able to precisely adjust the CPI for the improvement in quality, then, other things equal,

Accepted Answer

A)   the CPI will rise.
B)   the CPI will fall.
C)   the CPI will stay the same.
D)   lawn mowers will no longer be included in the market basket.E) A) and B)
F) A) and D)

Question 6

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was

Accepted Answer

A)   100.0.
B)   100.7.
C)   83.3.
D)   84.6.E) C) and D)
F) All of the above

Question 7

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 8

Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys.
 
-Refer to Table 24-5. The cost of the basket in 2006 was

Accepted Answer

A)   $9.
B)   $130.
C)   $140.
D)   $270.E) All of the above
F) A) and B)

Question 9

The second largest category, by relative importance, in the CPI calculation is

Accepted Answer

A)   housing.
B)   apparel.
C)   transportation.
D)   medical care.E) B) and D)
F) None of the above

Question 10

Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170?

Accepted Answer

A)   80 to 100
B)   100 to 120
C)   150 to 170
D)   All of these changes produce the same rate of inflation.E) A) and C)
F) C) and D)

Question 11

Table 24-8
The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers.
 
-Refer to Table 24-8. If the base year is 2014, then the consumer price index was

Accepted Answer

A)   80 in 2013, 100 in 2014, and 60 in 2015.
B)   98 in 2013, 100 in 2014, and 96 in 2015.
C)   90 in 2013, 100 in 2014, and 80 in 2015.
D)   180 in 2013, 200 in 2014, and 160 in 2015.E) A) and D)
F) C) and D)

Question 12

The content of the basket of goods and services used to compute the CPI changes every month.

Accepted Answer

A) True 
 B)False

Question 13

Table 24-2
The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans.
 
-Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was

Accepted Answer

A)   95.7.
B)   100.0.
C)   90.0.
D)   213.6.E) A) and D)
F) C) and D)

Question 14

If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?

Accepted Answer

The real i...

Question 15

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 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Accepted Answer

A) True 
 B)False

Question 16

Social Security payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation. Which of the following statements is correct?

Accepted Answer

A)   The newspaper editorial is correct under all circumstances.
B)   The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI.
C)   The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI
D)   The newspaper editorial is incorrect under all circumstances.E) C) and D)
F) All of the above

Question 17

The largest sector in the consumer price index market basket is food and beverage purchases.

Accepted Answer

A) True 
 B)False

Question 18

If the current year CPI is 140, then the price level has increased 40 percent since the base year.

Accepted Answer

A) True 
 B)False

Question 19

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Accepted Answer

A)   Sophia will have 3 percent more money, which will purchase 5 percent more goods.
B)   Sophia will have 3 percent more money, which will purchase 7 percent more goods.
C)   Sophia will have 5 percent more money, which will purchase 3 percent more goods.
D)   Sophia will have 5 percent more money, which will purchase 7 percent more goods.E) A) and D)
F) All of the above

Question 20

Table 24-2
The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans.
 
-Refer to Table 24-2. The cost of the basket in 2013 was

Accepted Answer

A)   $200.
B)   $225.
C)   $235.
D)   $237.5.E) A) and C)
F) C) and D)

Exam 11: Measuring the Cost of Living

Correct Answer
verified

If the real interest rate is 10.3% and the nominal interest rate is 12.6%, what is the inflation rate?

Correct Answer
verified
The inflat...
View Answer

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Correct Answer
verified

Correct Answer
verified

If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?

Correct Answer
verified
The real i...
View Answer

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. The cost of the basket in 2013 was

Correct Answer
verified

The content of the basket of goods and services used to compute the CPI changes every month.

Correct Answer
verified

The second largest category, by relative importance, in the CPI calculation is

Correct Answer
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Suppose a basket of goods and services has been selected to calculate the consumer price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in 2007, it cost $168.75. Which of the following statements is correct?

Correct Answer
verified

Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170?

Correct Answer
verified

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

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 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Correct Answer
verified

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was

Correct Answer
verified

The largest sector in the consumer price index market basket is food and beverage purchases.

Correct Answer
verified

The primary purpose of measuring the overall level of prices in the economy is to

Correct Answer
verified

The CPI is calculated

Correct Answer
verified

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. The cost of the basket in 2006 was

Correct Answer
verified

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. -Refer to Table 24-8. If the base year is 2014, then the consumer price index was

Correct Answer
verified

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was

Correct Answer
verified

If the current year CPI is 140, then the price level has increased 40 percent since the base year.

Correct Answer
verified

Exam 11: Measuring the Cost of Living

Correct AnswerverifiedShow Answer

If the real interest rate is 10.3% and the nominal interest rate is 12.6%, what is the inflation rate?

Correct AnswerverifiedThe inflat...View AnswerShow Answer

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?

Correct AnswerverifiedThe real i...View AnswerShow Answer

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. The cost of the basket in 2013 was

Correct AnswerverifiedShow Answer

The content of the basket of goods and services used to compute the CPI changes every month.

Correct AnswerverifiedShow Answer

The second largest category, by relative importance, in the CPI calculation is

Correct AnswerverifiedShow Answer

Suppose a basket of goods and services has been selected to calculate the consumer price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in 2007, it cost $168.75. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170?

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

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 5 percent during the year the money was deposited, then Bob's purchasing power has not changed.

Correct AnswerverifiedShow Answer

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was

Correct AnswerverifiedShow Answer

The largest sector in the consumer price index market basket is food and beverage purchases.

Correct AnswerverifiedShow Answer

The primary purpose of measuring the overall level of prices in the economy is to

Correct AnswerverifiedShow Answer

The CPI is calculated

Correct AnswerverifiedShow Answer

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. The cost of the basket in 2006 was

Correct AnswerverifiedShow Answer

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. -Refer to Table 24-8. If the base year is 2014, then the consumer price index was

Correct AnswerverifiedShow Answer

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was

Correct AnswerverifiedShow Answer

If the current year CPI is 140, then the price level has increased 40 percent since the base year.

Correct AnswerverifiedShow Answer

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The inflat...
View Answer

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The real i...
View Answer

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

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Correct Answer
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Correct Answer
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