Question 1

Andrew is offered a job in Little Rock,where the CPI is 80,and a job in New York,where the CPI is 125.Andrew's job offer in Little Rock is for $42,000.How much does the New York job have to pay in order for the two salaries to represent about the same purchasing power?

Accepted Answer

A)  $74,667
B)  $65,625
C)  $60,900
D)  $52,500E) All of the above
F) B) and D)

Question 2

The consumer price index is used to

Accepted Answer

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

Question 3

In the country of Hyrkania,the CPI in 2000 was 120 and the CPI in 2001 was 132.Jake,a resident of Hyrkania,borrowed money in 2000 and repaid the loan in 2001.If the nominal interest rate on the loan was 12 percent,then the real interest rate was

Accepted Answer

A)  12 percent.
B)  10 percent.
C)  2 percent.
D)  impossible to determine without knowing the base year for the CPI.E) All of the above
F) None of the above C

Question 4

Table 24-4
The table below pertains to an economy with only two goods -- books and calculators. The fixed basket consists of 5 books and 10 calculators.
 
-Refer to Table 24-4.Using 2007 as the base year,the consumer price index is

Accepted Answer

A)  78.22 in 2006, 100 in 2007, and 121.10 in 2008.
B)  74.07 in 2006, 100 in 2007, and 114.81 in 2008.
C)  100 in 2006, 135 in 2007, and 155 in 2008.
D)  200 in 2006, 270 in 2007, and 310 in 2008.E) A) and B)
F) B) and C)

Question 5

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

Accepted Answer

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

Question 6

In the country of Shem, the CPI is calculated using a market basket consisting of 5 apples, 4 loaves of bread, 3 robes and 2 gallons of gasoline. The per-unit prices of these goods have been as follows:
Table 24-3
 
-Refer to Table 24-3.Using 2002 as the base year,what was the inflation rate between 2002 and 2003?

Accepted Answer

A)  -8.89 percent
B)  -7.14 percent
C)  3.75 percent
D)  11.25 percentE) None of the above
F) A) and B)

Question 7

In the United States,real 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) All of the above
F) None of the above

Question 8

One of the widely-acknowledged problems with the consumer price index (CPI) 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) All of the above

Question 9

The CPI is computed by finding the price of a market basket of goods whose contents vary each year.

Accepted Answer

A) True 
 B)False  False

Question 10

The CPI is calculated

Accepted Answer

A)  weekly.
B)  monthly.
C)  quarterly.
D)  yearly.E) A) and B)
F) A) and C)

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

Most studies in the 1990s concluded that the consumer price index overstated inflation by about

Accepted Answer

A)  3 percentage points, and that number of percentage points likely still applies now.
B)  3 percentage points, but improvements in recent years to the CPI probably have reduced the overstatement of inflation to something less than 3 percentage points.
C)  1 percentage point, and that number of percentage points likely still applies now.
D)  1 percentage point, but improvements in recent years to the CPI probably have reduced the overstatement of inflation to something less than 1 percentage point.E) A) and B)
F) None of the above

Question 13

The CPI for 2000 is computed as 100 times the ratio of the price of the market basket in 2000 divided by the price of the market basket in the base year.

Accepted Answer

A) True 
 B)False

Question 14

The consumer price index is used to

Accepted Answer

A)  differentiate gross national product from net national product.
B)  turn dollar figures into meaningful measures of purchasing power.
C)  characterize the types of goods and services that consumers purchase.
D)  measure the quantity of goods and services that the economy produces.E) A) and B)
F) A) and D)

Question 15

Assume an economy experienced a higher inflation rate,as measured by the CPI,between 2004 and 2005 than it experienced between 2003 and 2004.Which of the following scenarios is consistent with this assumption?

Accepted Answer

A)  The CPI was 100 in 2003, 110 in 2004, and 120 in 2005.
B)  The CPI was 100 in 2003, 110 in 2004, and 124 in 2005.
C)  The CPI was 110 in 2003, 150 in 2004, and 200 in 2005.
D)  All of the above are correct.E) All of the above
F) B) and C)

Question 16

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Accepted Answer

A)  The real interest rate is the nominal interest rate times the rate of inflation.
B)  The real interest rate is the nominal interest rate minus the rate of inflation.
C)  The real interest rate is the nominal interest rate plus the rate of inflation.
D)  The real interest rate is the nominal interest rate divided by the rate of inflation.E) None of the above
F) All of the above

Question 17

The real 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 B)
F) B) and C) B

Question 18

Ralph puts money in the bank and earns a 5 percent nominal interest rate.Then,if the inflation rate is 3 percent,

Accepted Answer

A)  Ralph will have 3 percent more money, which will purchase 2 percent more goods.
B)  Ralph will have 3 percent more money, which will purchase 8 percent more goods.
C)  Ralph will have 5 percent more money, which will purchase 2 percent more goods.
D)  Ralph will have 5 percent more money, which will purchase 8 percent more goods.E) None of the above
F) C) and D)

Question 19

Suppose that U.S.mining companies purchase German-made ore trucks at a reduced price.By itself,what effect will this purchase have on the GDP deflator and on the consumer price index?

Accepted Answer

A)  The consumer price index will fall, and the GDP deflator will fall.
B)  The consumer price index and the GDP deflator will be unaffected.
C)  The consumer price index will fall, and the GDP deflator will be unaffected.
D)  The consumer price index will be unaffected, and the GDP deflator will fall.E) All of the above
F) A) and B)

Question 20

Which of the following statements about real and nominal interest rates is correct?

Accepted Answer

A)  When the nominal interest rate is rising, the real interest rate is necessarily rising; when the nominal interest rate is falling, the real interest rate is necessarily falling.
B)  If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the real interest rate is 7 percent.
C)  An increase in the real interest rate is necessarily accompanied by either an increase in the nominal interest rate, an increase in the inflation rate, or both.
D)  When the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate.E) None of the above
F) A) and D)

Exam 24: Measuring the Cost of Living

Andrew is offered a job in Little Rock,where the CPI is 80,and a job in New York,where the CPI is 125.Andrew's job offer in Little Rock is for $42,000.How much does the New York job have to pay in order for the two salaries to represent about the same purchasing power?

Correct Answer
verified

The consumer price index is used to

Correct Answer
verified

In the country of Hyrkania,the CPI in 2000 was 120 and the CPI in 2001 was 132.Jake,a resident of Hyrkania,borrowed money in 2000 and repaid the loan in 2001.If the nominal interest rate on the loan was 12 percent,then the real interest rate was

Correct Answer
verified
C

Table 24-4 The table below pertains to an economy with only two goods -- books and calculators. The fixed basket consists of 5 books and 10 calculators. -Refer to Table 24-4.Using 2007 as the base year,the consumer price index is

Correct Answer
verified

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

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

Correct Answer
verified

In the United States,real interest rates were

Correct Answer
verified

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

Correct Answer
verified

The CPI is computed by finding the price of a market basket of goods whose contents vary each year.

Correct Answer
verified
False

The CPI is calculated

Correct Answer
verified

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.

Correct Answer
verified

Most studies in the 1990s concluded that the consumer price index overstated inflation by about

Correct Answer
verified

The CPI for 2000 is computed as 100 times the ratio of the price of the market basket in 2000 divided by the price of the market basket in the base year.

Correct Answer
verified

The consumer price index is used to

Correct Answer
verified

Assume an economy experienced a higher inflation rate,as measured by the CPI,between 2004 and 2005 than it experienced between 2003 and 2004.Which of the following scenarios is consistent with this assumption?

Correct Answer
verified

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Correct Answer
verified

The real interest rate tells you

Correct Answer
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B

Ralph puts money in the bank and earns a 5 percent nominal interest rate.Then,if the inflation rate is 3 percent,

Correct Answer
verified

Suppose that U.S.mining companies purchase German-made ore trucks at a reduced price.By itself,what effect will this purchase have on the GDP deflator and on the consumer price index?

Correct Answer
verified

Which of the following statements about real and nominal interest rates is correct?

Correct Answer
verified

Exam 24: Measuring the Cost of Living

Andrew is offered a job in Little Rock,where the CPI is 80,and a job in New York,where the CPI is 125.Andrew's job offer in Little Rock is for $42,000.How much does the New York job have to pay in order for the two salaries to represent about the same purchasing power?

Correct AnswerverifiedShow Answer

The consumer price index is used to

Correct AnswerverifiedShow Answer

In the country of Hyrkania,the CPI in 2000 was 120 and the CPI in 2001 was 132.Jake,a resident of Hyrkania,borrowed money in 2000 and repaid the loan in 2001.If the nominal interest rate on the loan was 12 percent,then the real interest rate was

Correct AnswerverifiedC

Table 24-4 The table below pertains to an economy with only two goods -- books and calculators. The fixed basket consists of 5 books and 10 calculators. -Refer to Table 24-4.Using 2007 as the base year,the consumer price index is

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

In the United States,real interest rates were

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The CPI is computed by finding the price of a market basket of goods whose contents vary each year.

Correct AnswerverifiedFalse

The CPI is calculated

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Most studies in the 1990s concluded that the consumer price index overstated inflation by about

Correct AnswerverifiedShow Answer

The CPI for 2000 is computed as 100 times the ratio of the price of the market basket in 2000 divided by the price of the market basket in the base year.

Correct AnswerverifiedShow Answer

The consumer price index is used to

Correct AnswerverifiedShow Answer

Assume an economy experienced a higher inflation rate,as measured by the CPI,between 2004 and 2005 than it experienced between 2003 and 2004.Which of the following scenarios is consistent with this assumption?

Correct AnswerverifiedShow Answer

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

Correct AnswerverifiedShow Answer

The real interest rate tells you

Correct AnswerverifiedB

Ralph puts money in the bank and earns a 5 percent nominal interest rate.Then,if the inflation rate is 3 percent,

Correct AnswerverifiedShow Answer

Suppose that U.S.mining companies purchase German-made ore trucks at a reduced price.By itself,what effect will this purchase have on the GDP deflator and on the consumer price index?

Correct AnswerverifiedShow Answer

Which of the following statements about real and nominal interest rates is correct?

Correct AnswerverifiedShow Answer

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C

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

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False

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B

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