Question 1

Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

Accepted Answer

A)   Ms. Lane will repay the bank fewer dollars than she initially borrowed.
B)   Ms. Lane's repayment will give the bank less purchasing power than it originally loaned her.
C)   Ms. Lane's repayment will give the bank greater purchasing power than it originally loaned her.
D)   Ms. Lane's repayment will give the bank the same purchasing power that it originally loaned her.E) A) and B)
F) A) and C)

Question 2

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Accepted Answer

A)   Try to include all the goods and services that the typical consumer buys.
B)   Try to weight the goods and services that the typical consumer buys according to how much consumers buy of each item.
C)   Survey consumers to determine what the typical consumer buys.
D)   Survey sellers to determine what the typical consumer buys.E) A) and B)
F) A) and C)

Question 3

Michael Jordan's rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9, while the CPI in 2010 was 218.1. What is Michael Jordan's rookie salary in 2010 dollars?

Accepted Answer

The answer of Michael Jordan's rookie salary in 1984 was...

Question 4

When the consumer price index falls, the typical family

Accepted Answer

A)   has to spend more dollars to maintain the same standard of living.
B)   can spend fewer dollars to maintain the same standard of living.
C)   finds that its standard of living is not affected.
D)   can save less because they do not need to offset the effects of rising prices.E) C) and D)
F) None of the above

Question 5

Suppose the typical basket for the calculation of the CPI includes one computer. Since computers have gotten better over time as a result of technological change, what problem does this create for calculating the CPI?

Accepted Answer

The improvement in t...

Question 6

Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013.
-Refer to Scenario 24-3. In real terms, Sue Holloway's income amounts to about what percentage of Josh Holloway's income?

Accepted Answer

A)   11.0 percent
B)   65.2 percent
C)   70.9 percent
D)   114.7 percentE) A) and C)
F) A) and B)

Question 7

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent, then the real interest rate is

Accepted Answer

A)   -16 percent.
B)   -4 percent.
C)   4 percent.
D)   16 percent.E) A) and C)
F) B) and C)

Question 8

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) All of the above
F) None of the above

Question 9

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

Accepted Answer

A)   the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 6 percent.
B)   the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 8 percent.
C)   the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 4 percent.
D)   the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 6 percent.E) A) and B)
F) A) and C)

Question 10

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) A) and C)

Question 11

If the cost of housing increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Accepted Answer

A)   1.7 percent.
B)   3.3 percent.
C)   4.1 percent.
D)   10 percent.E) C) and D)
F) All of the above

Question 12

Table 24-15
The table below lists the prices of chips and salsa for the months of October, November, and December. Assume that the typical consumer buys 8 bags of chips and 4 jars of salsa each month, and that October is the base period.
 
-Refer to Table 24-15. Calculate the inflation rate for November.

Accepted Answer

The answer of Table 24-15
The table below lists the prices...

Question 13

Which is the most accurate statement about the GDP deflator and the consumer price index?

Accepted Answer

A)   The GDP deflator compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the consumer price index compares the price of currently produced goods and services to the price of the same goods and services in the base year.
B)   The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the GDP deflator compares the price of currently produced goods and services to the price of the same goods and services in the base year.
C)   Both the GDP deflator and the consumer price index compare the price of a fixed basket of goods and services to the price of the basket in the base year.
D)   Both the GDP deflator and the consumer price index compare the price of currently produced goods and services to the price of the same goods and services in the base year.E) A) and B)
F) C) and D)

Question 14

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

Accepted Answer

A)   151.4
B)   81.4
C)   55.1
D)   122.9E) None of the above
F) A) and C)

Question 15

The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?

Accepted Answer

A)   - 0.75 percent
B)   - 0.5 percent
C)   9.5 percent
D)   9.75 percentE) A) and D)
F) A) and C)

Question 16

Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price of ginger ale has increased 15 percent, so she decides to buy some peppermint tea instead. To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

A)   substitution bias
B)   introduction of new goods
C)   unmeasured quality change
D)   income effectE) B) and C)
F) C) and D)

Question 17

Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013.
-Refer to Scenario 24-3. Sue Holloway's 1944 income in 2013 dollars is

Accepted Answer

A)   $23,033.
B)   $136,909.
C)   $148,909.
D)   $240,960.E) None of the above
F) All of the above

Question 18

Table 24-6
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 24-6. If the base year is 2009, then the consumer price index was

Accepted Answer

A)   100 in 2009, 115 in 2010, and 116 in 2011.
B)   100 in 2009, 115 in 2010, and 135 in 2011.
C)   100 in 2009, 120 in 2010, and 116 in 2011.
D)   120 in 2009, 125 in 2010, and 135 in 2011.E) A) and B)
F) None of the above

Question 19

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below.
 
-Refer to Table 24-12. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670. Then

Accepted Answer

A)   the consumer price index was 11.8 percent higher in 2011 than it was in 2009.
B)   the inflation rate in 2011 was 8 percent.
C)   Will's 2011 food expenditures in 2009 dollars amount to $5,740.
D)   Will's 2010 food expenditures in 2011 dollars amount to $6,210.E) A) and B)
F) B) and D)

Question 20

The consumer price index tries to gauge how much incomes must rise to maintain

Accepted Answer

A)   an increasing standard of living.
B)   a constant standard of living.
C)   a decreasing standard of living.
D)   the highest standard of living possible.E) None of the above
F) C) and D)

Exam 6: Measuring the Cost of Living

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent, then the real interest rate is

Correct Answer
verified

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 Answer
verified

Correct Answer
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If the cost of housing increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Correct Answer
verified

Suppose the typical basket for the calculation of the CPI includes one computer. Since computers have gotten better over time as a result of technological change, what problem does this create for calculating the CPI?

Correct Answer
verified
The improvement in t...
View Answer

Correct Answer
verified

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

Correct Answer
verified

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

Correct Answer
verified

The consumer price index tries to gauge how much incomes must rise to maintain

Correct Answer
verified

Which is the most accurate statement about the GDP deflator and the consumer price index?

Correct Answer
verified

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Correct Answer
verified

Correct Answer
verified

Michael Jordan's rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9, while the CPI in 2010 was 218.1. What is Michael Jordan's rookie salary in 2010 dollars?

Correct Answer
verified

Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

Correct Answer
verified

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670. Then

Correct Answer
verified

Scenario 24-3 Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013. -Refer to Scenario 24-3. Sue Holloway's 1944 income in 2013 dollars is

Correct Answer
verified

Table 24-6 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 24-6. If the base year is 2009, then the consumer price index was

Correct Answer
verified

The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?

Correct Answer
verified

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

Correct Answer
verified

When the consumer price index falls, the typical family

Correct Answer
verified

Exam 6: Measuring the Cost of Living

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent, then the real interest rate is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the cost of housing increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Correct AnswerverifiedShow Answer

Suppose the typical basket for the calculation of the CPI includes one computer. Since computers have gotten better over time as a result of technological change, what problem does this create for calculating the CPI?

Correct AnswerverifiedThe improvement in t...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The consumer price index tries to gauge how much incomes must rise to maintain

Correct AnswerverifiedShow Answer

Which is the most accurate statement about the GDP deflator and the consumer price index?

Correct AnswerverifiedShow Answer

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Michael Jordan's rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9, while the CPI in 2010 was 218.1. What is Michael Jordan's rookie salary in 2010 dollars?

Correct AnswerverifiedShow Answer

Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670. Then

Correct AnswerverifiedShow Answer

Scenario 24-3 Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013. -Refer to Scenario 24-3. Sue Holloway's 1944 income in 2013 dollars is

Correct AnswerverifiedShow Answer

Table 24-6 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 24-6. If the base year is 2009, then the consumer price index was

Correct AnswerverifiedShow Answer

The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?

Correct AnswerverifiedShow Answer

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

Correct AnswerverifiedShow Answer

When the consumer price index falls, the typical family

Correct AnswerverifiedShow Answer

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The improvement in t...
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