Question 1

In the basket of goods that is used to compute the consumer price index,which of the following categories of consumer spending is the largest?

Accepted Answer

A)   education & communication
B)   recreation
C)   medical care
D)   All of the above categories are about equal in magnitude.E) B) and D)
F) C) and D)

Question 2

The price index was 110 in the first year,100 in the second year,and 96 in the third year.The economy experienced

Accepted Answer

A)   9.1 percent deflation between the first and second years,and 4 percent deflation between the second and third years.
B)   9.1 percent deflation between the first and second years,and 4.2 percent deflation between the second and third years.
C)   10 percent deflation between the first and second years,and 4 percent deflation between the second and third years.
D)   10 percent deflation between the first and second years,and 4.2 percent deflation between the second and third years.E) C) and D)
F) All of the above

Question 3

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.The cost of the basket

Accepted Answer

A)   increased by $10 from 2006 to 2007.
B)   increased by $42 from 2006 to 2007.
C)   increased by $70 from 2006 to 2007.
D)   increased by $150 from 2006 to 2007.E) A) and C)
F) B) and C)

Question 4

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006.The consumer price index was 177 in 2001 and 266 in 2006.Dewey's 2001 salary in 2006 dollars is

Accepted Answer

A)   $37,711.86.
B)   $49,906.02.
C)   $66,750.00.
D)   $112,711.86.E) B) and C)
F) A) and B)

Question 5

If the cost of transportation increases by 20 percent,then,other things the same,the CPI is likely to increase by about

Accepted Answer

A)   0.3 percent.
B)   1.7 percent.
C)   3.4 percent.
D)   10 percent.E) B) and C)
F) A) and D)

Question 6

In 1949,Sycamore,Illinois built a hospital for about $500,000.In 1987,the county restored the courthouse for about $1.7 million.A price index for nonresidential construction was 24 in 1949,108 in 1987,and 126.5 in 2000.According to these numbers,the hospital cost about

Accepted Answer

A)   $2.1 million in 2000 dollars,which is less than the cost of the courthouse restoration in 2000 dollars.
B)   $2.1 million in 2000 dollars,which is more than the cost of the courthouse restoration in 2000 dollars.
C)   $2.6 million in 2000 dollars,which is less than the cost of the courthouse restoration in 2000 dollars.
D)   $2.6 million in 2000 dollars,which is more than the cost of the courthouse restoration in 2000 dollars.E) A) and B)
F) B) and C)

Question 7

The CPI and GDP deflator usually tell two different stories about how quickly prices are rising.

Accepted Answer

A) True 
 B)False

Question 8

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level,then multiplying by the 1908 dollar figure.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)   -2.5 percent.
B)   0.45 percent.
C)   2.5 percent.
D)   13.5 percent.E) C) and D)
F) A) and C)

Question 10

The U.S.income tax system is completely indexed for inflation.

Accepted Answer

A) True 
 B)False

Question 11

In 1970,Professor Plum earned $12,000; in 1980,he earned $24,000; and in 1990,he earned $36,000.If the CPI was 40 in 1970,60 in 1980,and 100 in 1990,then in real terms,Professor Plum's salary was highest in

Accepted Answer

A)   1980 and lowest in 1970.
B)   1980 and lowest in 1990.
C)   1990 and lowest in 1970.
D)   1990 and lowest in 1980.E) B) and D)
F) None of the above

Question 12

What basket of goods and services is used to construct the CPI?

Accepted Answer

A)   a random sample of all goods and services produced in the economy
B)   the goods and services that are typically bought by consumers as determined by government surveys
C)   only food,clothing,transportation,entertainment,and education
D)   the least expensive and the most expensive goods and services in each major category of consumer expendituresE) A) and C)
F) A) and B)

Question 13

The GDP deflator reflects the prices of all goods and services produced around the world,whereas the consumer price index reflects the prices of all goods and services bought by consumers.

Accepted Answer

A) True 
 B)False

Question 14

the CPI was 96 in 1982,and the CPI was 208 in 2010.How much money would you have needed in 2010 in order to buy what you could have bought with $500 in 1982?

Accepted Answer

A)   $492.35
B)   $1,083.33
C)   $1,124.24
D)   $1,351.92E) B) and C)
F) A) and D)

Question 15

Ethel purchased a bag of groceries in 1970 for $8.She purchased the same bag of groceries in 2006 for $25.If the price index was 38.8 in 1970 and the price index was 180 in 2006,then what is the price of the 1970 bag of groceries in 2006 dollars?

Accepted Answer

A)   $5.39
B)   $25.00
C)   $29.11
D)   $37.11E) B) and C)
F) A) and B)

Question 16

Social Security payments are indexed for inflation using

Accepted Answer

A)   the CPI.
B)   the PPI.
C)   the GDP deflator.
D)   real interest rates.E) A) and D)
F) None of the above

Question 17

The consumer price index was 200 in 2006 and 210 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

Accepted Answer

A)   1.5 percent
B)   1.75 percent
C)   11.25 percent
D)   11.5 percentE) A) and D)
F) All of the above

Question 18

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players,we find that the current median salary of today's Yankees is

Accepted Answer

A)   about three quarters of Ruth's salary.
B)   about the same as Ruth's salary.
C)   about twice Ruth's salary.
D)   more than four times Ruth's salary.E) C) and D)
F) All of the above

Question 19

The inflation rate is calculated

Accepted Answer

A)   by determining the change in the price index from the preceding period.
B)   by determining the change in the price index from the base year.
C)   by determining the percentage change in the price index from the preceding period.
D)   by determining the percentage change in the price index from the base year.E) A) and D)
F) C) and D)

Question 20

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 120
C)   118 to 126
D)   All of these changes produce the same rate of inflation.E) B) and C)
F) A) and B)

Exam 16: Measuring the Cost of Living

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

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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.The cost of the basket

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In 1949,Sycamore,Illinois built a hospital for about $500,000.In 1987,the county restored the courthouse for about $1.7 million.A price index for nonresidential construction was 24 in 1949,108 in 1987,and 126.5 in 2000.According to these numbers,the hospital cost about

Correct AnswerverifiedShow Answer

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players,we find that the current median salary of today's Yankees is

Correct AnswerverifiedShow Answer

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level,then multiplying by the 1908 dollar figure.

Correct AnswerverifiedShow Answer

The CPI and GDP deflator usually tell two different stories about how quickly prices are rising.

Correct AnswerverifiedShow Answer

The consumer price index was 200 in 2006 and 210 in 2007.The nominal interest rate during this period was 6.5 percent.What was the real interest rate during this period?

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If the cost of transportation increases by 20 percent,then,other things the same,the CPI is likely to increase by about

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The inflation rate is calculated

Correct AnswerverifiedShow Answer

In the basket of goods that is used to compute the consumer price index,which of the following categories of consumer spending is the largest?

Correct AnswerverifiedShow Answer

What basket of goods and services is used to construct the CPI?

Correct AnswerverifiedShow Answer

the CPI was 96 in 1982,and the CPI was 208 in 2010.How much money would you have needed in 2010 in order to buy what you could have bought with $500 in 1982?

Correct AnswerverifiedShow Answer

Social Security payments are indexed for inflation using

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

The price index was 110 in the first year,100 in the second year,and 96 in the third year.The economy experienced

Correct AnswerverifiedShow Answer

The GDP deflator reflects the prices of all goods and services produced around the world,whereas the consumer price index reflects the prices of all goods and services bought by consumers.

Correct AnswerverifiedShow Answer

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006.The consumer price index was 177 in 2001 and 266 in 2006.Dewey's 2001 salary in 2006 dollars is

Correct AnswerverifiedShow Answer

In 1970,Professor Plum earned $12,000; in 1980,he earned $24,000; and in 1990,he earned $36,000.If the CPI was 40 in 1970,60 in 1980,and 100 in 1990,then in real terms,Professor Plum's salary was highest in

Correct AnswerverifiedShow Answer

The U.S.income tax system is completely indexed for inflation.

Correct AnswerverifiedShow Answer

Ethel purchased a bag of groceries in 1970 for $8.She purchased the same bag of groceries in 2006 for $25.If the price index was 38.8 in 1970 and the price index was 180 in 2006,then what is the price of the 1970 bag of groceries in 2006 dollars?

Correct AnswerverifiedShow Answer

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