Question 1

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Accepted Answer

A)   fails to account for consumer spending on housing.
B)   accounts only for consumer spending on food,clothing,and energy.
C)   fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods.
D)   fails to account for the introduction of new goods.E) A) and B)
F) A) and C)

Question 2

If the quality of a good deteriorates from one year to the next while its price remains the same,then the value of a dollar falls.

Accepted Answer

A) True 
 B)False

Question 3

In a period of inflation real interest rates will be greater than nominal interest rates.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

When the quality of a good improves 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) C) and D)
F) None of the above

Question 6

In a particular economy,the price index was 270 in 2005 and 300 in 2006.Which of the following statements is correct?

Accepted Answer

A)   The economy experienced a rising price level between 2005 and 2006.
B)   The economy experienced a higher inflation rate between 2005 and 2006 than it had experienced between 2004 and 2005.
C)   The inflation rate between 2005 and 2006 was 30 percent.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Question 7

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

Accepted Answer

A)   -9.5 percent.
B)   -4.5 percent.
C)   4.5 percent.
D)   9.5 percent.E) C) and D)
F) B) and D)

Question 8

In which of the following cases would there be an effect on the value of the U.S.consumer price index,but not on the value of the U.S.GDP deflator?

Accepted Answer

A)   All of the truck tires that are produced by a certain company in South Korea are sold to the U.S.military,and the price of these tires decreases.
B)   All of the truck tires that are produced by a certain company in California are sold to the U.S.military,and the price of these tires decreases.
C)   Most of the bananas that are produced by a certain company in Honduras end up in U.S.grocery stores,and the price of these bananas increases.
D)   Most of the earth-moving machines that are produced by a certain company in Illinois are exported to other countries,and the price of these machines increases.E) A) and B)
F) C) and D)

Question 9

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) None of the above
F) All of the above

Question 10

The inflation rate you are likely to hear on the nightly news is calculated from

Accepted Answer

A)   the GDP deflator.
B)   the CPI.
C)   the Dow Jones Industrial Average.
D)   the unemployment rate.E) A) and D)
F) A) and C)

Question 11

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2001 salary in 2006 dollars is

Accepted Answer

A)   $75,000; thus,Ruben's purchasing power increased between 2001 and 2006.
B)   $75,000; thus,Ruben's purchasing power decreased between 2001 and 2006.
C)   $85,000; thus,Ruben's purchasing power increased between 2001 and 2006.
D)   $85,000; thus,Ruben's purchasing power decreased between 2001 and 2006.E) B) and D)
F) All of the above

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

The CPI is always 1 in the base year.

Accepted Answer

A) True 
 B)False

Question 14

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following agencies calculates the CPI?

Accepted Answer

A)   the National Price Board
B)   the Department Of Weight and Measurements
C)   the Bureau of Labor Statistics
D)   the Congressional Budget OfficeE) A) and B)
F) B) and C)

Question 16

Table 16-11.Megan's salary for three consecutive years,along with other values,are presented in the table below.
 
-Refer to Table 16-11.Suppose the consumer price index for 2010 is not necessarily 233.2.If the nominal interest rate for 2010 is 7.3 percent ,then the consumer price index for 2010 is,in fact,

Accepted Answer

A)   210.00.
B)   216.06.
C)   220.48.
D)   226.26.E) A) and B)
F) All of the above

Question 17

Table 16-3
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 16-3.If 2008 is the base year,then the consumer price index was

Accepted Answer

A)   64.5 in 2006,87.1 in 2007,and 100 in 2008.
B)   64.5 in 2006,270 in 2007,and 310 in 2008.
C)   200 in 2006,87.1 in 2007,and 100 in 2008.
D)   200 in 2006,270 in 2007,and 310 in 2008.E) A) and D)
F) None of the above

Question 18

Table 16-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below.
 
-Refer to Table 16-12.If the nominal interest rate was 8 percent in 2010,then

Accepted Answer

A)   the real interest rate in 2010 was 3 percent.
B)   the real interest rate in 2010 was 4 percent.
C)   Will's 2009 food expenditures in 2010 dollars amount to $5,800.
D)   Will's 2009 food expenditures in 2011 dollars amount to $6,200.E) C) and D)
F) A) and B)

Question 19

For an imaginary economy,the value of the consumer price index was 125 in 2009,and the inflation rate was 4.8 percent between 2008 and 2009.The consumer price index in 2008 was

Accepted Answer

A)   119.27.
B)   120.2.
C)   129.8.
D)   131.E) A) and D)
F) C) and D)

Question 20

Why does the GDP deflator give a different rate of inflation than the CPI?

Accepted Answer

The GDP deflator and the CPI differ in t...

Exam 16: Measuring the Cost of Living

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

Correct Answer
verified

In a period of inflation real interest rates will be greater than nominal interest rates.

Correct Answer
verified

Table 16-3 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 16-3.If 2008 is the base year,then the consumer price index was

Correct Answer
verified

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Table 16-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below. -Refer to Table 16-12.If the nominal interest rate was 8 percent in 2010,then

Correct Answer
verified

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Correct Answer
verified

Correct Answer
verified

Which of the following agencies calculates the CPI?

Correct Answer
verified

In a particular economy,the price index was 270 in 2005 and 300 in 2006.Which of the following statements is correct?

Correct Answer
verified

For an imaginary economy,the value of the consumer price index was 125 in 2009,and the inflation rate was 4.8 percent between 2008 and 2009.The consumer price index in 2008 was

Correct Answer
verified

The inflation rate you are likely to hear on the nightly news is calculated from

Correct Answer
verified

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2001 salary in 2006 dollars is

Correct Answer
verified

In which of the following cases would there be an effect on the value of the U.S.consumer price index,but not on the value of the U.S.GDP deflator?

Correct Answer
verified

The CPI is always 1 in the base year.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

If the quality of a good deteriorates from one year to the next while its price remains the same,then the value of a dollar falls.

Correct Answer
verified

Why does the GDP deflator give a different rate of inflation than the CPI?

Correct Answer
verified
The GDP deflator and the CPI differ in t...
View Answer

Exam 16: Measuring the Cost of Living

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

Correct AnswerverifiedShow Answer

In a period of inflation real interest rates will be greater than nominal interest rates.

Correct AnswerverifiedShow Answer

Table 16-3 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 16-3.If 2008 is the base year,then the consumer price index was

Correct AnswerverifiedShow Answer

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 16-12.Will's expenditures on food for three consecutive years,along with other values,are presented in the table below. -Refer to Table 16-12.If the nominal interest rate was 8 percent in 2010,then

Correct AnswerverifiedShow Answer

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following agencies calculates the CPI?

Correct AnswerverifiedShow Answer

In a particular economy,the price index was 270 in 2005 and 300 in 2006.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

For an imaginary economy,the value of the consumer price index was 125 in 2009,and the inflation rate was 4.8 percent between 2008 and 2009.The consumer price index in 2008 was

Correct AnswerverifiedShow Answer

The inflation rate you are likely to hear on the nightly news is calculated from

Correct AnswerverifiedShow Answer

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2001 salary in 2006 dollars is

Correct AnswerverifiedShow Answer

In which of the following cases would there be an effect on the value of the U.S.consumer price index,but not on the value of the U.S.GDP deflator?

Correct AnswerverifiedShow Answer

The CPI is always 1 in the base year.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the quality of a good deteriorates from one year to the next while its price remains the same,then the value of a dollar falls.

Correct AnswerverifiedShow Answer

Why does the GDP deflator give a different rate of inflation than the CPI?

Correct AnswerverifiedThe GDP deflator and the CPI differ in t...View AnswerShow Answer

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The GDP deflator and the CPI differ in t...
View Answer