Question 1

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 inflation rate was

Accepted Answer

A)   24.3 percent in 2013 and 22.5 percent in 2014.
B)   23.8 percent in 2013 and 9.5 percent in 2014.
C)   23.8 percent in 2013 and 7.7 percent in 2014.
D)   24.3 percent in 2013 and 7.3 percent in 2014.E) B) and C)
F) All of the above

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Inflation can be measured using either the GDP deflator or the consumer price index.

Accepted Answer

A) True 
 B)False

Question 4

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 12 percent.

Accepted Answer

A) True 
 B)False

Question 5

Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causes inventors to look at alternative sources of fuel for internal-combustion engines. A hydrogen-powered engine is developed which is cheaper to operate than gasoline engines. Which problems in the construction of the CPI does this situation represent?

Accepted Answer

A)   substitution bias and introduction of new goods
B)   introduction of new goods and unmeasured quality change
C)   substitution bias and unmeasured quality change
D)   income bias and substitution biasE) A) and C)
F) None of the above

Question 6

If 2010 is the base year, then the inflation rate in 2015 equals

Accepted Answer

A)   
B)   
C)   
D)   E) B) and C)
F) All of the above

Question 7

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Accepted Answer

A) True 
 B)False

Question 8

If 2012 is the base year, then the inflation rate for 2012 equals

Accepted Answer

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

Question 9

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

Accepted Answer

A)   deflation.
B)   inflation.
C)   unmeasured quality change.
D)   substitution bias.E) B) and D)
F) A) and D)

Question 10

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as

Accepted Answer

A)   $2.67 purchases today.
B)   $37.50 purchases today.
C)   $39.00 purchases today.
D)   $104.00 purchases today.E) A) and C)
F) A) and B)

Question 11

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 B)
F) A) and C)

Question 12

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 2014 is the base year, then the consumer price index was

Accepted Answer

A)   75 in 2012, 92.8 in 2013, and 100 in 2014.
B)   75 in 2012, 93.2 in 2013, and 100 in 2014.
C)   247.5 in 2012, 307.5 in 2013, and 330 in 2014.
D)   210 in 2012, 260 in 2013, and 280 in 2014.E) A) and B)
F) A) and C)

Question 13

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?

Accepted Answer

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 todayE) All of the above
F) C) and D)

Question 14

Scenario 24-4
Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90.
-Refer to Scenario 24-4. If Quinn only cares about maximizing her purchasing power, then she should

Accepted Answer

A)   take the Charlieville job.
B)   take the Wrexington job.
C)   take either job because they both have the same purchasing power.
D)   The answer cannot be determined from the information given because a salary is not the same as purchasing power.E) All of the above
F) A) and D)

Question 15

The nominal interest rate tells you

Accepted Answer

A)   how fast the number of dollars in your bank account rises over time.
B)   how fast the purchasing power of your bank account rises over time.
C)   the number of dollars in your bank account today.
D)   the purchasing power of your bank account today.E) All of the above
F) C) and D)

Question 16

Which of the following is not correct?

Accepted Answer

A)   The U.S. economy has never experienced deflation.
B)   Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate.
C)   Since 1965, the U.S. economy has experienced rising consumer prices in most years.
D)   During deflation, the real interest rate exceeds the nominal interest rate.E) A) and C)
F) All of the above

Question 17

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 2012 was

Accepted Answer

A)   $108.
B)   $116.
C)   $112.
D)   $224.E) B) and D)
F) All of the above

Question 18

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was

Accepted Answer

A)   112.5 and the inflation rate was 12.5%.
B)   112.5 and the inflation rate was 4.6%.
C)   104.6 and the inflation rate was 4.6%.
D)   104.6 and the inflation rate was 12.5%.E) A) and D)
F) All of the above

Question 19

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Accepted Answer

A) True 
 B)False

Question 20

Table 24-1
The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year.
 
-Refer to Table 24-1. What belongs in space C?

Accepted Answer

A)   120
B)   25%
C)   8.7%
D)   12%E) A) and B)
F) A) and C)

Exam 6: Measuring the Cost of Living

The nominal interest rate tells you

Correct Answer
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Table 24-1 The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year. -Refer to Table 24-1. What belongs in space C?

Correct Answer
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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 inflation rate was

Correct Answer
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If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as

Correct Answer
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Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was

Correct Answer
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If 2012 is the base year, then the inflation rate for 2012 equals

Correct Answer
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Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If deflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 12 percent.

Correct Answer
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Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Correct Answer
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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 2014 is the base year, then the consumer price index was

Correct Answer
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If 2010 is the base year, then the inflation rate in 2015 equals

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

Correct Answer
verified

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

Correct Answer
verified

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

Inflation can be measured using either the GDP deflator or the consumer price index.

Correct Answer
verified

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Correct Answer
verified

Correct Answer
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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 2012 was

Correct Answer
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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?

Correct Answer
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Which of the following is not correct?

Correct Answer
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Exam 6: Measuring the Cost of Living

The nominal interest rate tells you

Correct AnswerverifiedShow Answer

Table 24-1 The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year. -Refer to Table 24-1. What belongs in space C?

Correct AnswerverifiedShow Answer

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 inflation rate was

Correct AnswerverifiedShow Answer

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as

Correct AnswerverifiedShow Answer

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was

Correct AnswerverifiedShow Answer

If 2012 is the base year, then the inflation rate for 2012 equals

Correct AnswerverifiedShow 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 deflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 12 percent.

Correct AnswerverifiedShow Answer

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Correct AnswerverifiedShow Answer

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 2014 is the base year, then the consumer price index was

Correct AnswerverifiedShow Answer

If 2010 is the base year, then the inflation rate in 2015 equals

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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

Inflation can be measured using either the GDP deflator or the consumer price index.

Correct AnswerverifiedShow Answer

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation rate is 3 percent.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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 2012 was

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

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