Question 1

If the real interest rate is 5 percent and the inflation rate is 2 percent,then the nominal interest rate is 7 percent.

Accepted Answer

A) True 
 B)False

Question 2

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 1970,70 in 1980,and 130 in 1990,then in real terms,Professor Plum's salary was highest in

Accepted Answer

A)   1970 and lowest in 1980.
B)   1970 and lowest in 1990.
C)   1980 and lowest in 1970.
D)   1980 and lowest in 1990.E) All of the above
F) B) and C)

Question 3

A Korean steel company produces steel in the United States,with some of its steel being exported to other nations and some of it being sold within the United States.If the prices of this steel increase,then

Accepted Answer

A)   the GDP deflator and the CPI will both increase.
B)   the GDP deflator will increase and the CPI will be unchanged.
C)   the GDP deflator will be unchanged and the CPI will increase.
D)   the GDP deflator and the CPI will both be unchanged.E) A) and C)
F) A) and B)

Question 4

The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006)by the CPI in 2006,then multiplying by 100.

Accepted Answer

A) True 
 B)False

Question 5

Marion collected Social Security payments of $250 a month in 1985.If the price index rose from 90 to 108 between 1985 and 1986,then her Social Security payments for 1986 should have been

Accepted Answer

A)   $268.
B)   $292.
C)   $300.
D)   $358.E) All of the above
F) B) and C)

Question 6

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 in 2006 was

Accepted Answer

A)   $32.
B)   $200.
C)   $280.
D)   $480.E) All of the above
F) C) and D)

Question 7

When box office receipts are not corrected for inflation,

Accepted Answer

A)   The Sound of Music ranks as the most popular movie of all time.
B)   Gone with the Wind does not rank as one of the 50 most popular movies of all time.
C)   Titanic ranks as the most popular movie of all time.
D)   Avatar does not rank as one of the 50 most popular movies of all time.E) A) and B)
F) A) and C)

Question 8

Consider a small economy in which consumers buy only two goods: apples and pears.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

Accepted Answer

A)   the number of apples bought by the typical consumer is equal to the number of pears bought by the typical consumer in each year.
B)   neither the number of apples nor the number of pears bought by the typical consumer changes from year to year.
C)   the percentage change in the price of apples is equal to the percentage change in the price of pears from year to year.
D)   neither the price of apples nor the price of pears changes from year to year.E) A) and D)
F) All of the above

Question 9

In the United States in the late 1970s,nominal interest rates were high and inflation rates were very high.As a result,real interest rates were

Accepted Answer

A)   very high.
B)   high.
C)   low,but never negative.
D)   low,and in some years they were negative.E) None of the above
F) All of the above

Question 10

Because the CPI is based on a fixed basket of goods,the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living.This is so because

Accepted Answer

A)   new goods and services are always of higher quality than existing goods and services.
B)   new goods and services cost less than existing goods and services.
C)   new goods and services cost more than existing goods and services.
D)   when a new good is introduced,it gives consumers greater choice,thus reducing the amount they must spend to maintain their standard of living.E) A) and C)
F) B) and C)

Question 11

If the nominal interest rate is 4 percent and the real interest rate is 7 percent,then the inflation rate is

Accepted Answer

A)   -3 percent.
B)   0.75 percent.
C)   3 percent.
D)   11 percent.E) A) and B)
F) A) and C)

Question 12

Table 16-5
The table below pertains to Napandsnack,an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.
 
-Refer to Table 16-5.If the base year is 2010,then the consumer price index was

Accepted Answer

A)   83.33 in 2009,100.00 in 2010,and 96.67 in 2011.
B)   85.56 in 2009,100.00 in 2010,and 102.22 in 2011.
C)   85.56 in 2009,100.00 in 2010,and 96.67 in 2011.
D)   92.22 in 2009,99.00 in 2010,and 95.22 in 2011.E) A) and D)
F) None of the above

Question 13

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.Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,750.Then x,the consumer price index for 2011,has a value of

Accepted Answer

A)   184.0.
B)   185.8.
C)   187.5.
D)   189.4.E) None of the above
F) B) and C)

Question 14

If the quality of a good improves while its price remains the same,then the value of a dollar

Accepted Answer

A)   rises and the cost of living increases.
B)   rises and the cost of living decreases.
C)   falls and the cost of living increases.
D)   falls and the cost of living decreases.E) A) and C)
F) C) and D)

Question 15

In addition to the consumer price index,the Bureau of Labor Statistics also calculates the

Accepted Answer

A)   macroeconomic price index.
B)   producer price index.
C)   rental unit price index.
D)   terms of trade.E) A) and B)
F) A) and D)

Question 16

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does,it is the more common gauge of inflation.

Accepted Answer

A) True 
 B)False

Question 17

Scenario 16-4
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 16-4.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) None of the above

Question 18

If the CPI was 90 in 1975 and is 225 today,then $100 today purchases the same amount of goods and services as

Accepted Answer

A)   $25.00 purchased in 1975.
B)   $33.33 purchased in 1975.
C)   $40.00 purchased in 1975.
D)   $135.55 purchased in 1975.E) A) and B)
F) A) and C)

Question 19

The CPI is calculated

Accepted Answer

A)   monthly by the Department of Commerce.
B)   monthly by the Bureau of Labor Statistics.
C)   quarterly by the Department of Commerce.
D)   quarterly by the Bureau of Labor Statistics.E) B) and D)
F) All of the above

Question 20

Suppose a basket of goods and services has been selected to calculate the CPI and 2004 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)   95.2.
C)   105.0.
D)   109.2.E) None of the above
F) A) and C)

Exam 16: Measuring the Cost of Living

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.Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,750.Then x,the consumer price index for 2011,has a value of

Correct Answer
verified

If the nominal interest rate is 4 percent and the real interest rate is 7 percent,then the inflation rate is

Correct Answer
verified

When box office receipts are not corrected for inflation,

Correct Answer
verified

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 1970,70 in 1980,and 130 in 1990,then in real terms,Professor Plum's salary was highest in

Correct Answer
verified

Because the CPI is based on a fixed basket of goods,the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living.This is so because

Correct Answer
verified

Marion collected Social Security payments of $250 a month in 1985.If the price index rose from 90 to 108 between 1985 and 1986,then her Social Security payments for 1986 should have been

Correct Answer
verified

If the quality of a good improves while its price remains the same,then the value of a dollar

Correct Answer
verified

Consider a small economy in which consumers buy only two goods: apples and pears.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

Correct Answer
verified

Table 16-5 The table below pertains to Napandsnack,an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 16-5.If the base year is 2010,then the consumer price index was

Correct Answer
verified

If the real interest rate is 5 percent and the inflation rate is 2 percent,then the nominal interest rate is 7 percent.

Correct Answer
verified

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does,it is the more common gauge of inflation.

Correct Answer
verified

The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006)by the CPI in 2006,then multiplying by 100.

Correct Answer
verified

Correct Answer
verified

In addition to the consumer price index,the Bureau of Labor Statistics also calculates the

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.The cost of the basket in 2006 was

Correct Answer
verified

In the United States in the late 1970s,nominal interest rates were high and inflation rates were very high.As a result,real interest rates were

Correct Answer
verified

The CPI is calculated

Correct Answer
verified

If the CPI was 90 in 1975 and is 225 today,then $100 today purchases the same amount of goods and services as

Correct Answer
verified

Suppose a basket of goods and services has been selected to calculate the CPI and 2004 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

Correct Answer
verified

A Korean steel company produces steel in the United States,with some of its steel being exported to other nations and some of it being sold within the United States.If the prices of this steel increase,then

Correct Answer
verified

Exam 16: Measuring the Cost of Living

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.Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,750.Then x,the consumer price index for 2011,has a value of

Correct AnswerverifiedShow Answer

If the nominal interest rate is 4 percent and the real interest rate is 7 percent,then the inflation rate is

Correct AnswerverifiedShow Answer

When box office receipts are not corrected for inflation,

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 1970,70 in 1980,and 130 in 1990,then in real terms,Professor Plum's salary was highest in

Correct AnswerverifiedShow Answer

Because the CPI is based on a fixed basket of goods,the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living.This is so because

Correct AnswerverifiedShow Answer

Marion collected Social Security payments of $250 a month in 1985.If the price index rose from 90 to 108 between 1985 and 1986,then her Social Security payments for 1986 should have been

Correct AnswerverifiedShow Answer

If the quality of a good improves while its price remains the same,then the value of a dollar

Correct AnswerverifiedShow Answer

Consider a small economy in which consumers buy only two goods: apples and pears.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

Correct AnswerverifiedShow Answer

Table 16-5 The table below pertains to Napandsnack,an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 16-5.If the base year is 2010,then the consumer price index was

Correct AnswerverifiedShow Answer

If the real interest rate is 5 percent and the inflation rate is 2 percent,then the nominal interest rate is 7 percent.

Correct AnswerverifiedShow Answer

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does,it is the more common gauge of inflation.

Correct AnswerverifiedShow Answer

The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006)by the CPI in 2006,then multiplying by 100.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In addition to the consumer price index,the Bureau of Labor Statistics also calculates the

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.The cost of the basket in 2006 was

Correct AnswerverifiedShow Answer

In the United States in the late 1970s,nominal interest rates were high and inflation rates were very high.As a result,real interest rates were

Correct AnswerverifiedShow Answer

The CPI is calculated

Correct AnswerverifiedShow Answer

If the CPI was 90 in 1975 and is 225 today,then $100 today purchases 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 2004 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

Correct AnswerverifiedShow Answer

A Korean steel company produces steel in the United States,with some of its steel being exported to other nations and some of it being sold within the United States.If the prices of this steel increase,then

Correct AnswerverifiedShow Answer

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