Question 1

If the current period has a CPI of 143,then the amount of inflation since the base period is

Accepted Answer

A)  unknown without knowing the base period's CPI.
B)  143 per cent.
C)  57 per cent.
D)  43 per cent.
E)  157 per cent.F) B) and E)
G) A) and E)

Question 2

-The data in the table above show the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2011.The cost of the CPI market basket in 2011 is

Accepted Answer

A)  $52.00.
B)  100.
C)  $5.00.
D)  $3.50.
E)  $64.00.F) A) and D)
G) C) and E)

Question 3

The outlet substitution bias is most likely to put ________ and so ________ the inflation rate.

Accepted Answer

A)  an upward bias into the CPI;understate
B)  a downward bias into the CPI;overstate
C)  a downward bias into the CPI;understate
D)  an upward bias into the CPI;overstate
E)  no bias into the CPI because it is such a small effect;have no effect onF) B) and E)
G) A) and B)

Question 4

Economists agree that the CPI

Accepted Answer

A)  almost always shows the cost of living rising less rapidly than is the case in reality.
B)  is a near perfect measure of the cost of living.
C)  is a possibly biased measure of the cost of living.
D)  has no relation to the cost of living.
E)  overstates inflation by about 4.1 percentage points a year.F) B) and D)
G) B) and E)

Question 5

The CPI is a measure of the

Accepted Answer

A)  average prices of all goods and services produced.
B)  average change in the output of the goods and services purchased by a typical urban consumer.
C)  average prices of all goods.
D)  average prices paid by consumers for a fixed basket of goods and services.
E)  percentage change in the price level.F) B) and E)
G) B) and D)

Question 6

The bias in the CPI distorts private contracts because

Accepted Answer

A)  a worker that links her salary to the CPI is likely to be worse off than a worker that doesn't link her salary to the CPI.
B)  a lender that links the interest payments on the loan to the CPI is likely to be worse off than a lender that does not link the interest payments on the loan to the CPI.
C)  a future payment that is linked to the CPI is likely to be raised above the true increase in the price level.
D)  a future increase in a payment that is linked to the CPI is likely to be less than the true increase in the price level.
E)  the CPI cannot properly account for what goods and services a typical urban consumer buys.F) All of the above
G) None of the above

Question 7

If the nominal wage is $30 in 2015 and the CPI is 202 in 2015,then the real wage in the base year

Accepted Answer

A)  is $29.00.
B)  is $14.85.
C)  is $1.48.
D)  is $30.
E)  cannot be calculated without the past year wage rate.F) A) and D)
G) A) and E)

Question 8

If prices have increased since the base period,then

Accepted Answer

A)  there is no way to adjust nominal GDP so that it equals real GDP.
B)  real GDP can no longer be compared to nominal GDP.
C)  real GDP is smaller than nominal GDP.
D)  real GDP is larger than nominal GDP.
E)  real GDP is equal to nominal GDP.F) A) and E)
G) C) and E)

Question 9

Which of the following statements about the CPI is/are correct?
i.The only significant bias in the CPI is the commodity substitution bias.
ii.In Australia it is estimated the CPI overstates inflation by 1.1 percentage points a year.
iii.The RBA estimates that substitution bias is about 0.5 percentage points.

Accepted Answer

A)  i only
B)  ii only
C)  iii only
D)  ii and iii
E)  i and iiF) A) and B)
G) C) and D)

Question 10

An example of the commodity substitution bias in the calculation of the CPI is a price increase in

Accepted Answer

A)  new homes because people's incomes have increased.
B)  e-books versus used books bought through the university bookshop.
C)  a GPS unit versus a Melways map book.
D)  a 2014 Toyota Camry versus a 2005 Honda Civic.
E)  turkey when the price of chicken doesn't rise.F) A) and C)
G) B) and C)

Question 11

In Australia between 1980/81 and 2014/15,the

Accepted Answer

A)  real and the nominal wage rates decreased by the same amount.
B)  nominal wage rate decreased and the real wage rate increased.
C)  nominal wage rate increased more than the real wage rate.
D)  real wage rate increased more than the nominal wage rate.
E)  nominal and real wage rates increased by the same amount.F) All of the above
G) B) and D)

Exam 7: The Cpi and the Cost of Living

Correct Answer
verified

If prices have increased since the base period,then

Correct Answer
verified

In Australia between 1980/81 and 2014/15,the

Correct Answer
verified

If the current period has a CPI of 143,then the amount of inflation since the base period is

Correct Answer
verified

-The data in the table above show the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2011.The cost of the CPI market basket in 2011 is

Correct Answer
verified

An example of the commodity substitution bias in the calculation of the CPI is a price increase in

Correct Answer
verified

The outlet substitution bias is most likely to put and so the inflation rate.

Correct Answer
verified

Economists agree that the CPI

Correct Answer
verified

The bias in the CPI distorts private contracts because

Correct Answer
verified

The CPI is a measure of the

Correct Answer
verified

If the nominal wage is $30 in 2015 and the CPI is 202 in 2015,then the real wage in the base year

Correct Answer
verified

Exam 7: The Cpi and the Cost of Living

Correct AnswerverifiedShow Answer

If prices have increased since the base period,then

Correct AnswerverifiedShow Answer

In Australia between 1980/81 and 2014/15,the

Correct AnswerverifiedShow Answer

If the current period has a CPI of 143,then the amount of inflation since the base period is

Correct AnswerverifiedShow Answer

-The data in the table above show the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2011.The cost of the CPI market basket in 2011 is

Correct AnswerverifiedShow Answer

An example of the commodity substitution bias in the calculation of the CPI is a price increase in

Correct AnswerverifiedShow Answer

The outlet substitution bias is most likely to put ________ and so ________ the inflation rate.

Correct AnswerverifiedShow Answer

Economists agree that the CPI

Correct AnswerverifiedShow Answer

The bias in the CPI distorts private contracts because

Correct AnswerverifiedShow Answer

The CPI is a measure of the

Correct AnswerverifiedShow Answer

If the nominal wage is $30 in 2015 and the CPI is 202 in 2015,then the real wage in the base year

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

The outlet substitution bias is most likely to put and so the inflation rate.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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