Question 1

The GDP deflator reflects the

Accepted Answer

A)   level of prices in the base year relative to the current level of prices.
B)   current level of prices relative to the level of prices in the base year.
C)   level of real output in the base year relative to the current level of real output.
D)   current level of real output relative to the level of real output in the base year.E) All of the above
F) A) and C)

Question 2

The price index was 220 in one year and 260 in the next year.What was the inflation rate?

Accepted Answer

A)   9.0 percent
B)   114.6 percent
C)   18.2 percent
D)   40.0 percentE) C) and D)
F) B) and D)

Question 3

Suppose lawn mowers are part of the market basket used to compute the CPI.Suppose also that the quality of lawn mowers deteriorates while the price of lawn mowers stays the same.If the Bureau of Labor Statistics is able to precisely adjust the CPI for the improvement in quality,then,other things equal,

Accepted Answer

A)   the CPI will rise.
B)   the CPI will fall.
C)   the CPI will stay the same.
D)   lawn mowers will no longer be included in the market basket.E) A) and D)
F) None of the above

Question 4

When the relative price of a good decreases,consumers respond by buying

Accepted Answer

A)   a larger quantity of that good and a larger quantity of substitutes for that good.
B)   a larger quantity of that good and a smaller quantity of substitutes for that good.
C)   a smaller quantity of that good and a larger quantity of substitutes for that good.
D)   a smaller quantity of that good and a smaller quantity of substitutes for that good.E) B) and C)
F) A) and C)

Question 5

John just graduated law school and has two competing job offers.The first is in Phoenix and pays a salary of $150,000.He has a similar job offer in Cleveland that pays $90,000.Which pair of CPIs would make the two salaries have the same purchasing power?

Accepted Answer

A)   70 in Phoenix and 42 in Cleveland
B)   68 in Phoenix and 34 in Cleveland
C)   42 in Phoenix and 70 in Cleveland
D)   34 in Phoenix and 68 in ClevelandE) B) and D)
F) A) and C)

Question 6

Table 16-11.Megan's salary for three consecutive years,along with other values,are presented in the table below.
 
-Refer to Table 16-11.The nominal interest rate for 2009 is

Accepted Answer

A)   2.40 percent.
B)   3.66 percent.
C)   6.60 percent.
D)   9.60 percent.E) A) and B)
F) A) and C)

Question 7

If the CPI was 125 this year and 120 last year,then

Accepted Answer

A)   the cost of the CPI basket of goods and services increased by 4.2 percent this year.
B)   the price level increased by 4.2 percent this year.
C)   the inflation rate for this year was 4.2 percent.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 8

The price index was 120 in 2006 and 127.2 in 2007.What was the inflation rate?

Accepted Answer

A)   5.7 percent
B)   6.0 percent
C)   7.2 percent
D)   27.2 percentE) None of the above
F) B) and C)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Accepted Answer

A) True 
 B)False

Question 11

Table 16-2
The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn.
 
-Refer to Table 16-2.If 2008 is the base year,then the inflation rate in 2009 was

Accepted Answer

A)   26.5 percent.
B)   36.1 percent.
C)   39 percent.
D)   47 percent.E) None of the above
F) A) and D)

Question 12

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 B)
F) C) and D)

Question 13

The group of goods and services used to compute the GDP deflator changes automatically over time,but the group of goods and services used to compute the CPI does not.

Accepted Answer

A) True 
 B)False

Question 14

Indexation refers to

Accepted Answer

A)   a process of adjusting the nominal interest rate so that it is equal to the real interest rate.
B)   using a law or contract to automatically correct a dollar amount for the effects of inflation.
C)   using a price index to deflate dollar values.
D)   an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator.E) C) and D)
F) B) and D)

Question 15

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent,then the real interest rate is

Accepted Answer

A)   -5 percent.
B)   1.67 percent.
C)   5 percent.
D)   11 percent.E) A) and C)
F) B) and C)

Question 16

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 D)
F) C) and D)

Question 17

If the price of Italian shoes imported into the United States increases,then

Accepted Answer

A)   both the GDP deflator and the consumer price index will increase.
B)   neither the GDP deflator nor the consumer price index will increase.
C)   the GDP deflator will increase,but the consumer price index will not increase.
D)   the consumer price index will increase,but the GDP deflator will not increase.E) B) and D)
F) C) and D)

Question 18

The CPI was 172 in 2007,and the CPI was 46.5 in 1982.If your parents put aside $1,000 for you in 1982,then how much would you have needed in 2007 in order to buy what you could have bought with the $1,000 in 1982?

Accepted Answer

A)   $270.35
B)   $1,255.00
C)   $2,698.92
D)   $3,698.92E) A) and B)
F) A) and C)

Question 19

In the late 1970s,U.S.nominal interest rates were high and real interest rates were low,but in the late 1990s,U.S.nominal interest rates were low and real interest rates were high.

Accepted Answer

A) True 
 B)False

Question 20

One of the differences between the GDP deflator and the consumer price index is

Accepted Answer

A)   the GDP deflator includes income earned by American citizens working in foreign countries and the consumer price index is based solely on purchases made in the U.S.
B)   the consumer price index basket of goods is updated constantly by the Bureau of Labor Statistics whereas the GDP deflator is updated only occasionally.
C)   the consumer price index includes items not included in the GDP deflator such as airplanes purchased by the Air Force.
D)   the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers.E) All of the above
F) C) and D)

Exam 16: Measuring the Cost of Living

The price index was 120 in 2006 and 127.2 in 2007.What was the inflation rate?

Correct Answer
verified

The price index was 220 in one year and 260 in the next year.What was the inflation rate?

Correct Answer
verified

Table 16-2 The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn. -Refer to Table 16-2.If 2008 is the base year,then the inflation rate in 2009 was

Correct Answer
verified

The GDP deflator reflects the

Correct Answer
verified

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent,then the real interest rate is

Correct Answer
verified

Table 16-11.Megan's salary for three consecutive years,along with other values,are presented in the table below. -Refer to Table 16-11.The nominal interest rate for 2009 is

Correct Answer
verified

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Correct Answer
verified

If the price of Italian shoes imported into the United States increases,then

Correct Answer
verified

The group of goods and services used to compute the GDP deflator changes automatically over time,but the group of goods and services used to compute the CPI does not.

Correct Answer
verified

When the relative price of a good decreases,consumers respond by buying

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

One of the differences between the GDP deflator and the consumer price index is

Correct Answer
verified

Which of the following is the most accurate statement?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

John just graduated law school and has two competing job offers.The first is in Phoenix and pays a salary of $150,000.He has a similar job offer in Cleveland that pays $90,000.Which pair of CPIs would make the two salaries have the same purchasing power?

Correct Answer
verified

Indexation refers to

Correct Answer
verified

In the late 1970s,U.S.nominal interest rates were high and real interest rates were low,but in the late 1990s,U.S.nominal interest rates were low and real interest rates were high.

Correct Answer
verified

The CPI was 172 in 2007,and the CPI was 46.5 in 1982.If your parents put aside $1,000 for you in 1982,then how much would you have needed in 2007 in order to buy what you could have bought with the $1,000 in 1982?

Correct Answer
verified

If the CPI was 125 this year and 120 last year,then

Correct Answer
verified

Exam 16: Measuring the Cost of Living

The price index was 120 in 2006 and 127.2 in 2007.What was the inflation rate?

Correct AnswerverifiedShow Answer

The price index was 220 in one year and 260 in the next year.What was the inflation rate?

Correct AnswerverifiedShow Answer

Table 16-2 The table below pertains to Iowan,an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn. -Refer to Table 16-2.If 2008 is the base year,then the inflation rate in 2009 was

Correct AnswerverifiedShow Answer

The GDP deflator reflects the

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent,then the real interest rate is

Correct AnswerverifiedShow Answer

Table 16-11.Megan's salary for three consecutive years,along with other values,are presented in the table below. -Refer to Table 16-11.The nominal interest rate for 2009 is

Correct AnswerverifiedShow Answer

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing.

Correct AnswerverifiedShow Answer

If the price of Italian shoes imported into the United States increases,then

Correct AnswerverifiedShow Answer

The group of goods and services used to compute the GDP deflator changes automatically over time,but the group of goods and services used to compute the CPI does not.

Correct AnswerverifiedShow Answer

When the relative price of a good decreases,consumers respond by buying

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

One of the differences between the GDP deflator and the consumer price index is

Correct AnswerverifiedShow Answer

Which of the following is the most accurate statement?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

John just graduated law school and has two competing job offers.The first is in Phoenix and pays a salary of $150,000.He has a similar job offer in Cleveland that pays $90,000.Which pair of CPIs would make the two salaries have the same purchasing power?

Correct AnswerverifiedShow Answer

Indexation refers to

Correct AnswerverifiedShow Answer

In the late 1970s,U.S.nominal interest rates were high and real interest rates were low,but in the late 1990s,U.S.nominal interest rates were low and real interest rates were high.

Correct AnswerverifiedShow Answer

The CPI was 172 in 2007,and the CPI was 46.5 in 1982.If your parents put aside $1,000 for you in 1982,then how much would you have needed in 2007 in order to buy what you could have bought with the $1,000 in 1982?

Correct AnswerverifiedShow Answer

If the CPI was 125 this year and 120 last year,then

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified