Question 1

Table 24-10
The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats.
 
-Refer to Table 24-10. If 2010 is the base year, then the consumer price index was

Accepted Answer

A)   77.40 in 2008, 85.16 in 2009, and 100.00 in 2010.
B)   50.50 in 2008, 67.50 in 2009, and 100.00 in 2010.
C)   90.88 in 2008, 85.16 in 2009, and 100.00 in 2010.
D)   169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.E) A) and D)
F) A) and C)

Question 2

Which of the following is the most accurate statement?

Accepted Answer

A)   In the 1970s, the late 1980s, 1990s, and 2000s, the GDP deflator and the CPI both showed high rates of inflation.
B)   In the 1970s, both the GDP deflator and the consumer price index showed high rates of inflation, and in the late 1980s, 1990s, and 2000s, both measures showed low rates of inflation.
C)   In the 1970s, both the GDP deflator and the consumer price index showed low rates of inflation, and in the late 1980s, 1990s, and 2000s, both measures showed high rates of inflation.
D)   In the 1970s, the late 1980s, 1990s, and 2000s, the GDP deflator and the CPI both showed low rates of inflation.E) A) and D)
F) A) and C)

Question 3

Table 24-16
The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year.
 
-Refer to Table 24-16. Calculate the missing value that belongs in space C.

Accepted Answer

The answer of Table 24-16
The table below lists annual consumer...

Question 4

If the nominal interest rate is 4 percent and the real interest rate is -2.5 percent, then the inflation rate is

Accepted Answer

A)   -6.5 percent.
B)   -1.5 percent.
C)   1.5 percent.
D)   6.5 percent.E) B) and C)
F) A) and C)

Question 5

Suppose prices of personal computers fall significantly and consumers respond by buying more personal computers. The consumer price index

Accepted Answer

A)   reflects this price decrease accurately.
B)   understates this price decrease due to the substitution bias.
C)   overstates this price decrease due to the income bias.
D)   overstates this price decrease due to the substitution bias.E) All of the above
F) B) and C)

Question 6

An important difference between the GDP deflator and the consumer price index is that

Accepted Answer

A)   the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers.
B)   the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers.
C)   the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.
D)   the GDP deflator reflects the prices of all final goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.E) None of the above
F) A) and B)

Question 7

The CPI is always 1 in the base year.

Accepted Answer

A) True 
 B)False

Question 8

Scenario 24-1
The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-1. The price of a 1975 tennis ball in 2005 dollars is

Accepted Answer

A)   $0.03.
B)   $0.27.
C)   $0.37.
D)   $1.00.E) B) and C)
F) A) and B)

Question 9

Scenario 24-4
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 24-4. The Charlieville salary in Wrexington dollars is

Accepted Answer

A)   $24,000.00.
B)   $26,666.67.
C)   $60,000.00
D)   $66,666.67.E) A) and B)
F) A) and C)

Question 10

In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was 235 in 2013, then what is the price of the Firebird in 2013 dollars?

Accepted Answer

A)   $4,609.57
B)   $4,957.51
C)   $13,508.17
D)   $16,008.17E) B) and C)
F) B) and D)

Question 11

Nate collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then his Social Security payments for 1986 should have been

Accepted Answer

A)   $228.
B)   $238.
C)   $257.
D)   $264.E) B) and C)
F) All of the above

Question 12

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was

Accepted Answer

A)   98.0.
B)   102.0.
C)   104.0.
D)   151.0.E) A) and D)
F) All of the above

Question 13

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Accepted Answer

A) True 
 B)False

Question 14

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.
 
-Refer to Table 24-7. Which of the following scenarios is consistent with this statement? "The rate of inflation was 23.75 percent for 2011."

Accepted Answer

A)   The price of a hot dog was $2.44 rather than $3.30 in 2010, with other prices in the table remaining fixed.
B)   The price of a hot dog was $4.22 rather than $3.63 in 2011, with other prices in the table remaining fixed..
C)   The price of a hamburger was $3.80 rather than $5.50 in 2010, with other prices in the table remaining fixed.
D)   The price of a hamburger was $6.60 rather than $5.61 in 2011, with other prices in the table remaining fixed.E) B) and D)
F) B) and C)

Question 15

Scenario 24-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is

Accepted Answer

A)   $0.05.
B)   $0.53.
C)   $0.73.
D)   $2.00.E) All of the above
F) A) and B)

Question 16

The problems with using the consumer price index as a measure of the cost of living are important because

Accepted Answer

A)   even the appearance of high rates of inflation cause voters to become disenchanted.
B)   politicians have manipulated the measurement problems to their advantage.
C)   many government programs use the CPI to adjust for changes in the overall level of prices.
D)   if the price level is overstated, consumers will be taken advantage of by sellers of consumer goods.E) C) and D)
F) A) and B)

Question 17

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?

Accepted Answer

A)   $5,400
B)   $20,466
C)   $26,158
D)   $41,159E) All of the above
F) A) and B)

Question 18

The real interest rate is the interest rate corrected for inflation.

Accepted Answer

A) True 
 B)False

Question 19

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.
 
-Refer to Table 24-7. If the base year is 2010, then the consumer price index is

Accepted Answer

A)   100 in 2009, 109 in 2010, and 115 in 2011.
B)   95.90 in 2009, 100 in 2010, and 107.44 in 2011.
C)   90.91 in 2009, 100 in 2010, and 106.36 in 2011.
D)   88.82 in 2009, 100 in 2010, and 107.44 in 2011.E) B) and D)
F) A) and B)

Question 20

Table 24-5
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 24-5. If the base year is 2004, then the inflation rate in 2006 was

Accepted Answer

A)   44.4%.
B)   50%.
C)   62.5%.
D)   80%.E) A) and D)
F) B) and D)

Exam 16: Measuring the Cost of Living

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 24-7. If the base year is 2010, then the consumer price index is

Correct Answer
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The real interest rate is the interest rate corrected for inflation.

Correct Answer
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Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was

Correct Answer
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Scenario 24-1 The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-1. The price of a 1975 tennis ball in 2005 dollars is

Correct Answer
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Table 24-5 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 24-5. If the base year is 2004, then the inflation rate in 2006 was

Correct Answer
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The problems with using the consumer price index as a measure of the cost of living are important because

Correct Answer
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Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?

Correct Answer
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If the nominal interest rate is 4 percent and the real interest rate is -2.5 percent, then the inflation rate is

Correct Answer
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Table 24-10 The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats. -Refer to Table 24-10. If 2010 is the base year, then the consumer price index was

Correct Answer
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Nate collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then his Social Security payments for 1986 should have been

Correct Answer
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Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 24-7. Which of the following scenarios is consistent with this statement? "The rate of inflation was 23.75 percent for 2011."

Correct Answer
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Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is

Correct Answer
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Which of the following is the most accurate statement?

Correct Answer
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An important difference between the GDP deflator and the consumer price index is that

Correct Answer
verified

In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was 235 in 2013, then what is the price of the Firebird in 2013 dollars?

Correct Answer
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Correct Answer
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Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Correct Answer
verified

Suppose prices of personal computers fall significantly and consumers respond by buying more personal computers. The consumer price index

Correct Answer
verified

Table 24-16 The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year. -Refer to Table 24-16. Calculate the missing value that belongs in space C.

Correct Answer
verified

The CPI is always 1 in the base year.

Correct Answer
verified

Exam 16: Measuring the Cost of Living

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 24-7. If the base year is 2010, then the consumer price index is

Correct AnswerverifiedShow Answer

The real interest rate is the interest rate corrected for inflation.

Correct AnswerverifiedShow Answer

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was

Correct AnswerverifiedShow Answer

Scenario 24-1 The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-1. The price of a 1975 tennis ball in 2005 dollars is

Correct AnswerverifiedShow Answer

Table 24-5 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 24-5. If the base year is 2004, then the inflation rate in 2006 was

Correct AnswerverifiedShow Answer

The problems with using the consumer price index as a measure of the cost of living are important because

Correct AnswerverifiedShow Answer

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?

Correct AnswerverifiedShow Answer

If the nominal interest rate is 4 percent and the real interest rate is -2.5 percent, then the inflation rate is

Correct AnswerverifiedShow Answer

Table 24-10 The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats. -Refer to Table 24-10. If 2010 is the base year, then the consumer price index was

Correct AnswerverifiedShow Answer

Nate collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then his Social Security payments for 1986 should have been

Correct AnswerverifiedShow Answer

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 24-7. Which of the following scenarios is consistent with this statement? "The rate of inflation was 23.75 percent for 2011."

Correct AnswerverifiedShow Answer

Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is

Correct AnswerverifiedShow Answer

Which of the following is the most accurate statement?

Correct AnswerverifiedShow Answer

An important difference between the GDP deflator and the consumer price index is that

Correct AnswerverifiedShow Answer

In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was 235 in 2013, then what is the price of the Firebird in 2013 dollars?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent.

Correct AnswerverifiedShow Answer

Suppose prices of personal computers fall significantly and consumers respond by buying more personal computers. The consumer price index

Correct AnswerverifiedShow Answer

Table 24-16 The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year. -Refer to Table 24-16. Calculate the missing value that belongs in space C.

Correct AnswerverifiedShow Answer

The CPI is always 1 in the base year.

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