Question 1

Table 24-2
The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn.
 
-Refer to Table 24-2.If 2009 is the base year,then the inflation rate in 2009 was

Accepted Answer

A)   26.5 percent.
B)   36.1 percent.
C)   39 percent.
D)   47 percent.E) All of the above
F) C) and D)

Question 2

Table 24-3
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 24-3.The inflation rate was

Accepted Answer

A)   22.6 percent in 2007 and 12.9 percent in 2008.
B)   25.9 percent in 2007 and 14.8 percent in 2008.
C)   35 percent in 2007 and 14.8 percent in 2008.
D)   35 percent in 2007 and 20 percent in 2008.E) C) and D)
F) None of the above

Question 3

In the United States,nominal interest rates were

Accepted Answer

A)   high in the 1970s and 1990s.
B)   low in the 1970s and 1990s.
C)   high in the 1970s and low in the 1990s.
D)   low in the 1970s and high in the 1990s.E) A) and C)
F) A) and B)

Question 4

In the U.S. ,when the price of oil rises,the CPI rises by much more than does the GDP deflator.

Accepted Answer

A) True 
 B)False

Question 5

Table 24-4
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 24-4.If the base year is 2004,then the CPI

Accepted Answer

A)   increased from 2004 to 2005 and increased from 2005 to 2006.
B)   increased from 2004 to 2005 and decreased from 2005 to 2006.
C)   decreased from 2004 to 2005 and increased from 2005 to 2006.
D)   decreased from 2004 to 2005 and decreased from 2005 to 2006.E) B) and D)
F) A) and B)

Question 6

The consumer price index is used to

Accepted Answer

A)   monitor changes in the level of wholesale prices in the economy.
B)   monitor changes in the cost of living over time.
C)   monitor changes in the level of real GDP over time.
D)   monitor changes in the stock market.E) All of the above
F) C) and D)

Question 7

The consumer price index tries to gauge how much incomes must rise to maintain

Accepted Answer

A)   an increasing standard of living.
B)   a constant standard of living.
C)   a decreasing standard of living.
D)   the highest standard of living possible.E) All of the above
F) A) and B)

Question 8

An increase in the price of dairy products produced domestically will be reflected in

Accepted Answer

A)   both the GDP deflator and the consumer price index.
B)   neither the GDP deflator nor the consumer price index.
C)   the GDP deflator but not in the consumer price index.
D)   the consumer price index but not in the GDP deflator.E) A) and B)
F) All of the above

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year.In 2002,the basket's cost was $50;in 2004,the basket's cost was $52;and in 2006,the basket's cost was $54.60.The value of the CPI in 2006 was

Accepted Answer

A)   91.6.
B)   104.6.
C)   109.2.
D)   154.6.E) C) and D)
F) A) and B)

Question 11

There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

Accepted Answer

A) True 
 B)False

Question 12

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006.The consumer price index was 177 in 2001 and 265.5 in 2006.Henri's 2006 salary in 2001 dollars is

Accepted Answer

A)   $35,000.00.
B)   $46,666.67.
C)   $61,950.00
D)   $105,000.00.E) A) and D)
F) A) and C)

Question 13

Which of the following is not correct?

Accepted Answer

A)   The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power.
B)   The consumer price index is used to monitor changes in the cost of living over time.
C)   The consumer price index is used by economists to measure the inflation rate.
D)   The consumer price index is used to measure the quantity of goods and services that the economy is producing.E) A) and B)
F) A) and C)

Question 14

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

Accepted Answer

A)   housing.
B)   transportation.
C)   education & communication.
D)   food & beverages.E) A) and B)
F) A) and C)

Question 15

You know that a candy bar costs sixty cents today.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 1962 prices?

Accepted Answer

A)   sixty cents(today's CPI - 1962 CPI) 
B)   sixty cents(1962 CPI - today's CPI) 
C)   sixty cents(today's CPI / 1962 CPI) 
D)   sixty cents(1962 CPI / today's CPI) E) All of the above
F) A) and B)

Question 16

Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112,112 to 118,or 118 to 124?

Accepted Answer

A)   106 to 112
B)   112 to 118
C)   118 to 124
D)   All of these changes produce the same rate of inflation.E) None of the above
F) B) and D)

Question 17

In the calculation of the CPI,sweaters are given greater weight than jeans if

Accepted Answer

A)   the price of sweaters is higher than the price of jeans.
B)   it costs more to produce sweaters than it costs to produce jeans.
C)   sweaters are more readily available than jeans are to the typical consumer.
D)   consumers buy more sweaters than jeans.E) C) and D)
F) None of the above

Question 18

Scenario 24-3
Grant Gant was a doctor in 1944 and earned $12,000 that year.His daughter,Gretta Gant,is a doctor today and she earned $210,000 in 2005.The price index was 17.6 in 1944 and 184 in 2005.
-Refer to Scenario 24-3.Grant Gant's 1944 income in 2005 dollars is

Accepted Answer

A)   $1,147.83.
B)   $113,454.55.
C)   $125,454.55.
D)   $1,996,800.00.E) A) and C)
F) A) and D)

Question 19

Table 24-5
The table below pertains to Yackandsnack,an economy in which the typical consumer's basket consists of 2 cell phones and 20 ham sandwiches.
 
-Refer to Table 24-5.If the base year is 2007,then the economy's inflation rate in 2008 was

Accepted Answer

A)   1.05 percent.
B)   4.8 percent.
C)   5 percent.
D)   10 percent.E) A) and B)
F) B) and C)

Question 20

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) A) and C)
F) None of the above

Exam 24: Measuring the Cost of Living

You know that a candy bar costs sixty cents today.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 1962 prices?

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Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year.In 2002,the basket's cost was $50;in 2004,the basket's cost was $52;and in 2006,the basket's cost was $54.60.The value of the CPI in 2006 was

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Table 24-3 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 24-3.The inflation rate was

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In the U.S. ,when the price of oil rises,the CPI rises by much more than does the GDP deflator.

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

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Table 24-4 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 24-4.If the base year is 2004,then the CPI

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The consumer price index is used to

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The consumer price index tries to gauge how much incomes must rise to maintain

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Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112,112 to 118,or 118 to 124?

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The nominal interest rate tells you

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An increase in the price of dairy products produced domestically will be reflected in

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Henri earned a salary of $50,000 in 2001 and $70,000 in 2006.The consumer price index was 177 in 2001 and 265.5 in 2006.Henri's 2006 salary in 2001 dollars is

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Table 24-2 The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn. -Refer to Table 24-2.If 2009 is the base year,then the inflation rate in 2009 was

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In the United States,nominal interest rates were

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Which of the following is not correct?

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There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

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

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In the calculation of the CPI,sweaters are given greater weight than jeans if

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Scenario 24-3 Grant Gant was a doctor in 1944 and earned $12,000 that year.His daughter,Gretta Gant,is a doctor today and she earned $210,000 in 2005.The price index was 17.6 in 1944 and 184 in 2005. -Refer to Scenario 24-3.Grant Gant's 1944 income in 2005 dollars is

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Table 24-5 The table below pertains to Yackandsnack,an economy in which the typical consumer's basket consists of 2 cell phones and 20 ham sandwiches. -Refer to Table 24-5.If the base year is 2007,then the economy's inflation rate in 2008 was

Correct AnswerverifiedShow Answer

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