Question 1

Changes in the consumer price index are useful in predicting changes in the producer price index.

Accepted Answer

A) True 
 B)False

Question 2

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 2008 is the base year, then the consumer price index was

Accepted Answer

A)   100.00 in 2008, 110.03 in 2009, and 117.43 in 2010.
B)   100.00 in 2008, 110.03 in 2009, and 129.20 in 2010.
C)   100.00 in 2008, 117.00 in 2009, and 132.50 in 2010.
D)   169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.E) A) and B)
F) A) and C)

Question 3

Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. 
-Refer to Table 24-3. If 2013 is the base year, then the CPI for 2013 was

Accepted Answer

A)   75.3.
B)   100.0.
C)   116.0.
D)   132.8.E) C) and D)
F) B) and C)

Question 4

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Accepted Answer

A) True 
 B)False

Question 5

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) None of the above
F) A) and B)

Question 6

If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest rate is

Accepted Answer

A)   -4 percent.
B)   3 percent.
C)   4 percent.
D)   8 percent.E) B) and D)
F) B) and C)

Question 7

In the calculation of the CPI, tea is given greater weight than beer if

Accepted Answer

A)   the price of tea is higher than the price of beer.
B)   it costs more to produce tea than it costs to produce beer.
C)   tea is more readily available than beer to the typical consumer.
D)   consumers buy more tea than beer.E) A) and B)
F) None of the above

Question 8

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 C)
F) All of the above

Question 9

The real interest rate measures the change in dollar amounts.

Accepted Answer

A) True 
 B)False

Question 10

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was the real interest rate during this period?

Accepted Answer

A)   3 percent
B)   2 percent
C)   3.3 percent
D)   12.8 percentE) A) and B)
F) None of the above

Question 11

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 CPI

Accepted Answer

A)   increased from 2004 to 2005 and increased from 2005 to 2006.
B)   increased from 2004 to 2005 and decreased from 2005 to 2006.
C)   decreased from 2004 to 2005 and increased from 2005 to 2006.
D)   decreased from 2004 to 2005 and decreased from 2005 to 2006.E) B) and D)
F) All of the above

Question 12

Which of the following is not correct?

Accepted Answer

A)   The U.S. economy has never experienced deflation.
B)   Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate.
C)   Since 1965, the U.S. economy has experienced rising consumer prices in most years.
D)   During deflation, the real interest rate exceeds the nominal interest rate.E) A) and C)
F) C) and D)

Question 13

During a certain year, the consumer price index increased from 120 to 132 and the purchasing power of a person's bank account increased by 4 percent. For that year,

Accepted Answer

A)   the nominal interest rate was 6 percent.
B)   the nominal interest rate was 14 percent.
C)   the inflation rate was 12 percent.
D)   the inflation rate was 9 percent.E) C) and D)
F) B) and C)

Question 14

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 2006, then the inflation rate in 2005 was

Accepted Answer

A)   -44.5%.
B)   -30.8%.
C)   7.7%.
D)   12.5%.E) A) and B)
F) A) and C)

Question 15

In 1986, Ken bought a Ford Mustang for $8,000. If the price index was 122 in 1986 and the price index was 280 in 2011, then what is the price of the Mustang in 2011 dollars?

Accepted Answer

A)   $3,485.71
B)   $8,100.71
C)   $18,360.66
D)   $22,400.00E) A) and C)
F) A) and D)

Question 16

Inflation can be measured using either the GDP deflator or the consumer price index.

Accepted Answer

A) True 
 B)False

Question 17

The inflation rate is the absolute change in the price level from the previous period.

Accepted Answer

A) True 
 B)False

Question 18

In the CPI, goods and services are weighted according to

Accepted Answer

A)   how long a market has existed for each good or service.
B)   the extent to which each good or service is regarded by the government as a necessity.
C)   how much consumers buy of each good or service.
D)   the number of firms that produce and sell each good or service.E) A) and C)
F) B) and C)

Question 19

When box office receipts are corrected for inflation, the most popular movie of all time is

Accepted Answer

A)   Star Wars.
B)   Titanic.
C)   Gone With the Wind.
D)   The Sound of Music.E) C) and D)
F) A) and D)

Question 20

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 2011 salary in 1980 dollars?

Accepted Answer

A)   $25,511
B)   $52,073
C)   $40,140
D)   $41,159E) A) and C)
F) All of the above

Exam 24: Measuring the Cost of Living

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 CPI

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If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest 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

In 1986, Ken bought a Ford Mustang for $8,000. If the price index was 122 in 1986 and the price index was 280 in 2011, then what is the price of the Mustang in 2011 dollars?

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During a certain year, the consumer price index increased from 120 to 132 and the purchasing power of a person's bank account increased by 4 percent. For that year,

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

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 2011 salary in 1980 dollars?

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 2008 is the base year, then the consumer price index was

Correct AnswerverifiedShow Answer

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. If 2013 is the base year, then the CPI for 2013 was

Correct AnswerverifiedShow Answer

When box office receipts are corrected for inflation, the most popular movie of all time 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 2006, then the inflation rate in 2005 was

Correct AnswerverifiedShow Answer

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

Correct AnswerverifiedShow Answer

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was the real interest rate during this period?

Correct AnswerverifiedShow Answer

The real interest rate measures the change in dollar amounts.

Correct AnswerverifiedShow Answer

Changes in the consumer price index are useful in predicting changes in the producer price index.

Correct AnswerverifiedShow Answer

Inflation can be measured using either the GDP deflator or the consumer price index.

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

The inflation rate is the absolute change in the price level from the previous period.

Correct AnswerverifiedShow Answer

In the calculation of the CPI, tea is given greater weight than beer if

Correct AnswerverifiedShow Answer

In the CPI, goods and services are weighted according to

Correct AnswerverifiedShow Answer

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